More Obama Infrastructure Plays: Vulcan Looks Good

Here is another group of smaller cap plays on any infrastructure spending in the next stimulus bill that should be coming out in January.

Last week President-elect Barack Obama proposed a massive infrastructure spending plan that might limit the current depth of the recession. The plan, which is expected to be dedicated to rebuilding roads, bridges, schools, electrical grids and dams, would be “sizeable, substantial, and sustained” in its length and scope.

Another stock I have been researching is Vulcan Materials (VMC) which is a company based in Alabama that makes aggregates and cement products. They seem to have about 1/3 of the revenue of Cemex (CX) but are actually growing their revenue quarter to quarter. I also notice that Vulcan seems less tied to the slowing Mexican and European construction market then Cemex currently is. Also Vulcan has a nice little 2.9% dividend yield to fall back on when you are waiting for the orders to come in.

The only problem I see is that both companies are pretty well weighted down with debt with Vulcan taking on a big load to acquire Florida Rock Ind. in 2007. While Cemex seems to be trying to refinance $6 billion in debt that is coming due in 2009. It seems Cemex bought out Rinker which is an aggregate, and building materials maker from Australia right when the US construction market seemed to fall apart.

In any case I think rebuilding roads, bridges, schools, and dams will need tons and tons of aggregate and cement and there should be more then enough new business for both companies. I guess it is just the case of going with a better balance sheet with Vulcan or getting a discounted stock due to the debt refinance problems at Cemex.