Dear Mr. Berko: I want to invest $40,000, which is about 15 percent of my individual retirement account, in construction stocks that will benefit by President Donald Trump’s infrastructure spending. Please recommend four or five issues for me. Meanwhile, I’ve finally made up my mind (against your 2013 recommendation to me) to move to a smartphone. Is there a model or brand that you would recommend?
— F.F., Rochester, Minn.
Dear F.F.: Ask a teenager, not an adult. The average smartphone user has experienced a 27 percent weight gain in the past five years. Just look around you.
Few civilized men have heard of Aecom (ACM-$37.17), a $17.4 billion revenue company with 92,000 employees. ACM provides consulting, engineering design and construction management services for highways, airports, bridges, mass transit systems and water and wastewater facilities for commercial, industrial and government clients. ACM has had disappointing revenues and earnings during the past few years, but the shares have rallied nicely since Trump’s victory. There are a large number of road infrastructure ballot initiatives across the nation. And Wall Street is bullish on ACM’s prospects for road infrastructure, especially the possibility that Congress will be generous in funding many upcoming initiatives. Over the coming four years, ACM’s revenues may grow to $22 billion, and its net profit margin may improve to 3.4 percent. Earnings could grow from $2.95 a share to $4.60 by 2021. ACM has a good balance sheet and had a strong cash flow of over $700 million last year. Argus Research, Bank of America, Credit Suisse and Thomson Reuters have “buy” recommendations on ACM. Consider buying ACM on a pullback to $32 with a good-till-canceled order marked “do not reduce.”
Valspar’s (VAL-$104) merger with Sherwin-Williams should make the resulting company a plum investment for infrastructure spending. VAL sells decorative and protective coatings for metal, woodwork and plastics, primarily to original equipment manufacturers, and it also sells consumer paints, stains, primers, varnishes and faux finishes. VAL has been selling stuff since 1806, when Tom Jefferson was president; it was also the year in which Ralph Wedgwood invented carbon paper. This $4.2 billion revenue firm with 5,200 employees enjoys strong and improving net profit margins, a dividend that has been increasing by 10 percent annually since 2008 and an impressive 34 percent return on equity. The Street believes that in the coming four years, VAL could post 25 percent revenue growth and a 40 percent net earnings improvement, though the dividend growth may be slower. Bank of America and J.P. Morgan believe that VAL could trade between $140 and $145 in the next four years. Place a good-till-canceled order at $92, and mark it “DNR.”
