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U.S. President-elect Joe Biden's key campaign promises are in focus as investors consider how to adjust their portfolios to gain from the next administration's policies.
During the presidential debates and in written plans throughout his campaign, Biden highlighted several areas that would be the cornerstone of his presidency. Two areas in particular stand to benefit from the Biden administration: infrastructure spending and clean energy.
Against this background, here are two exchange-traded funds (ETFs) focusing on those domains that stand to benefit:
The President-elect's plans to increase spending on building roads, bridges, tunnels, and other infrastructure projects, will likely benefit firms in the space. We can divide companies into owners—railroads and utilities, and enablers—and operators, including materials and construction companies.
When analyzing individual infrastructure stocks, the strength of their assets, quality of management, and valuation levels are all important factors. A company's growth prospects in terms of revenue and cash flow, market position, and regulatory issues should also be considered.
The iShares U.S. Infrastructure ETF (NYSE:IFRA) provides access to U.S.-based firms likely to benefit from increased infrastructure activities. The fund started trading in April 2018.
IFRA, which has 134 holdings, tracks the NYSE FactSet U.S. Infrastructure Index. The top ten firms have a weighting of 9%, so no single company can significantly influence ETF's price by itself.
Chemical products manufacturer Olin (NYSE:OLN), global engineering firm Fluor (NYSE:FLR), equipment and components manufacturer Dover (NYSE:DOV), diversified energy operator Chesapeake Utilities (NYSE:CPK), construction equipment manufacturer Terex (NYSE:TEX) and pool and irrigation products distributor Pool (NASDAQ:POOL) are the leading names in the fund.
Since the start of the year, IFRA is down about 8%. Trailing P/E and P/B ratios are 17.01 and 1.70, respectively. Investors in infrastructure stocks typically look for passive income and capital appreciation. The fund's trailing dividend yield stands at 2.25%.
In addition to utilities, renewable energy and electric vehicle (EV) companies also stand to gain from the Biden administration.
Volkswagen (OTC:VWAPY) CEO Herbert Diess has recently said a Biden administration would be better for the group's efforts to increase EV sales globally.
SPDR S&P Kensho Smart Mobility (NYSE:HAIL) is an investment in the evolution of consumer and commercial transportation. EV as well as drone technology are the main features of this fund.
HAIL, which has 56 holdings, started trading in 2017. The top ten firms compose around 40% of the ETF. China-based EV group NIO (NYSE:NIO), makes up 11.05% of the fund and has surged by 935% in 2020. Top U.S. based companies include Hydrogen fuel cell system manufacturer Plug Power (NASDAQ:PLUG), EV heavyweight Tesla (NASDAQ:TSLA), electrically-powered delivery vehicle firm Workhorse (NASDAQ:WKHS), and automotive industry components supplier BorgWarner (NYSE:BWA).
Automobile Manufacturers make up 25.76% of HAIL, followed by Auto Parts & Equipment (20.25%), and Semiconductors (11.70%). Year-to-date, the fund is up by 44% and hit an all-time high of $43.97 on Nov. 6. Trailing P/E and P/B ratios are 25.21 and 2.51. Investors may regard any upcoming profit-taking in the ETF as an opportunity to buy.
Other ETFs market participants could research include:
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