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Biden’s Big Infrastructure Bill

June 25, 2021

President Biden and a bipartisan group of Senators have finally reached a deal on the massive infrastructure bill. When first introduced on the campaign trail, Biden proposed $2.25 trillion for sustainable infrastructure and a clean energy economy. As a prerequisite, please read the tax report for some greater tax background on the discussed topics.

However, what gets proposed is not necessarily what gets passed. Here’s what we’ll cover in this report:

  • What’s in the bill and which sectors are set to benefit?
  • How negotiations between Senate Republicans and Democrats reveal what’s important and what’s not to each side
  • Which congressional members are already invested in infrastructure stocks. Remember: they are voting on this bill!
  • Lobbying in 2021 may hint at which companies will benefit the most
  • What does this all mean to retail investors?

Back and forth we go

For literally months now, the White House has been negotiating with Senate Republicans (and moderate Senate Democrat Joe Manchin) on what constitutes infrastructure and who should pay for it. Republicans, led by Senator Shelley M. Capito, were adamant that taxpayers (like you and I) should pay to maintain traditional infrastructure like roads, bridges and broadband. Meanwhile, Biden and the Senate Democrats had a broader definition of infrastructure that included things like school construction/repair and even home/elderly care. They also argued that corporations and the rich (people making more than $400,000/year) should pay for it.

Here’s how things ultimately played out:

How It Started

July 14, 2020

Biden first announced his infrastructure proposal way back in July 2020 on the campaign trail. No specific numbers were put to his commitments other than the $2 trillion price tag, but he outlined which sectors were important and why. Now as President, he tasked his Administration with crafting and passing this massive investment in sustainable infrastructure and clean energy. In March 2021, he announced the details of The American Jobs Plan with dollar signs attached.

How It Went

May 27, 2021

Senate Republicans instead unveiled their 928 billion dollar infrastructure counteroffer.

They stripped away funding for green initiatives and social infrastructure, focusing solely on the traditionals like roads, bridges, waterways, broadband, etc. Biden had been vocal about his willingness to reduce his plan by more than $1 trillion, but required guaranteed funding for clean energy and new jobs. This counteroffer appeared unable to meet those demands and ultimately negotiations with Senator Capito broke down.

How It’s Going

June 24, 2021

Just last week, Biden and a group of bipartisan Senators - 11 Republicans and 10 Democrats, which excluded Senator Capito - agreed to $1.2 trillion in infrastructure funding. Compromises were made on both sides.

Good news: no increase in the gas tax or EV user fees in order to pay for these new investments. No increases to corporate taxes either. Instead, taxes will be raised on individuals making over $400k/year and IRS enforcement will be beefed up to make sure those making 400,000 a year pay more.

Let’s compare some of the sectors that were negotiated on. Note that not every line item in Biden’s initial proposal or the final deal are shown here, but the big ticket items are.

References:

You must have noticed that all spending to retrofit and modernize homes and educational facilities (ie. schools, community colleges and daycares), as well as investments in the care economy (ie. VA hospitals, long-term care facilities and essential home care workers) were sacrificed to reach this deal. Biden and Senate Democrats agreed to pass a Democrat-only bill separately through budget reconciliation (requiring only 50-votes in the Senate) that would provide funding for the rest of these programs.

It’s been very interesting to see what ultimately made it into the bill and what was scrapped or moved. If you’ve been swimming along with Unusual Whales, past posts have highlighted how some elected officials vote to pass massive spending that affect sectors where they or their family members have already invested in. This was the case for semiconductor chips, and this time is no different.

Let’s look at who’s already invested in “infrastructure”.

Congressional Trades

A short list of stocks was compiled by skimming through the many “Top X stocks that will benefit from Biden’s infrastructure bill” articles that have been published in the last couple months. This list was used to filter congressional trades made since Biden first introduced this plan on the campaign trail.

The House

Below is a summary of stock purchases by House members (from 116th and 117th Congresses) categorized by the sectors outlined in Biden’s bill. Renewable energy stocks, electric vehicles and rail were popular picks.

Diving a little deeper, here’s a chart to quickly show who has bought and sold specific infrastructure stocks. We already know that Tesla is a popular pick in the House, but it’s interesting to see Representatives pick up and hold infrastructure-related stocks in 2021. Specifically: AMT, CAT, CCI, DE, FCX and NEE.

You can browse individual stock price charts below. Buys, sells and major events are included as points along the price charts. These charts are interactive: you can zoom in to a specific time period and hover over points for more information. Double click to reset. Browse your favourites!

Select stock ticker:

Some notable buys and HODLs that may benefit from this bill include:

  • Rep. Brian Mast bought Ideal Power Inc (IPWR) at the end of 2020. Now up 34%.
  • Rep. Josh Gottheimer and Rep Richard Allen have both picked up infrastructure staples like Deere (DE) and Freeport-McMoRan (FCX) throughout early 2021. Gottheimer is up 14% on FCX and red on DE, while Allen is up 20% on FCX and 12% on DE.
  • Rep. Pete Sessions’ spouse picked up American Tower Corporation (AMT) in mid-April 2021. She’s now up 10%. Both he and his spouse picked up Crown Castle International Corporation (CCI), the largest provider for communications infrastructure, in early May and are both up a modest 5-7%.
  • Rep. Susie Lee picked up CCI back in August 2020 and is now up 24%. Recently, she picked up Evoqua Water Technologies Corp (AQUA) in mid-February and she’s currently up 42%.
  • Rep Debbie Wasserman’s spouse picked up EMKR, a relatively unknown mixed signals optical equipment company. It was their only purchase this year. The 45k they invested at $6.28 (over a two day period three purchases) rallied to $10.34 at peak. She is up +60%. This broadband company is interesting primarily because it likely will benefit from both versions of the infrastructure bill. A lot of reps/senators play broadband and these companies will likely benefit from the "Build America" initiatives.
  • On March 17, Rep. William Keating bought a huge swath of stocks in different industries. Some infrastructure-themed stocks he picked up during that time included CCI, Caterpillar Inc (CAT), Jacobs Engineering Group Inc (J), and United Rentals Inc (URI). All this before Biden’s big announcement on the details for his infrastructure bill. He’s up 20% on CCI and 8% on J.

The Senate

In contrast, Senators haven’t disclosed as many infrastructure-related trades since July 2020. From what was filtered, only broadband’s AMT, and EV-related OSK, PLUG and TSLA appeared as Senate picks. Here’s who bought or sold these tickers.

And by using these price charts, you can see when exactly these Senators made those trades. Buys, sells and major events are included as points along the price charts. These charts are interactive: you can zoom in to a specific time period and hover over points for more information. Double click to reset. Browse your favourites!

Select stock ticker:

Some notable gains so far:

  • Senator Ron Wyden’s spouse bought Oshkosh stock (OSK) just after Biden announced his big climate change proposal on July 20, 2020. She’s held since and is up 67%.
  • Senator Pat Roberts’ spouse picked up Plug Power Inc (PLUG) at the end of 2020 and has been holding (down 7.8% at the moment). He famously got TSLA presplit for 100k, and sold for double in one month.
  • Senator Shelley Capito’s spouse bought American Tower Corporation (AMT), a notable wireless infrastructure giant, on December 31, 2020. He’s up 18%. Interesting to note that Senator Capito’s counter-offer did not decrease funding to broadband at all

What can 2021 lobbying numbers tell us?

Lobbying activity is disclosed at both the House and Senate level. How much money flooded into the Senate at the beginning of the year and could this have affected what sectors were prioritized later during negotiations?

Below is a chart illustrating the amount of lobbying expenses disclosed by major infrastructure-related corporations and interest groups. This is just the amount of money disclosed during Q1 2021 (January to March).

As we can see, the highest contributions were reported by the broadband sector (CCI with $1.89M and AMT with $1.43M), followed by energy companies and general infrastructure stocks in construction and metals. This may be why broadband investments didn’t budge during negotiations!

Over the last year, there’s been heightened interest in the connection between corporate lobbying and awarding of government contracts. With a new administration, new relationships need to be created and maintained between the corporate world and the legislative/executive branches. It may be important to continue monitoring lobbying expenses as Biden floods sectors with new funding.

I want to also state, the companies lobbying against certain measures are not being considered here. For example, there are huge lobbying efforts against certain EV credits. These lobbying efforts are indirect and more difficult to quantify, but need to be stated and understood in the changing nature of the bill. Please see numerous legacy oil and gas companies for their lobbying efforts here.

Takeaways

Biden’s deal was sacrificed slightly, however, it is still set to pass.

Importantly, numerous House members and Senators have purchased stock that will directly benefit from this deal.

This is huge. With the incoming infrastructure projects, the benefit from trading these infrastructure stocks cannot be oversold. Politicians are benefiting from these deals, with possible projects to be awarded in these numerous stocks. They purchased before; they are benefiting after.

Have they leveraged both their vote and inside knowledge of these trades due to lobbying? Perhaps. CCI is one of the largest lobbying powers, and incidentally, numerous House members purchased its stock. What do they know that the average person does not?

The argument has been made that Congressional members should not have any financial stakes in the success or failure of specific companies (private or public), especially before a bill. The question should always be how can public good be best served unbiasedly.

Unusual Whales will continue following these trades at unusualwhales.com/politics