Editor's Note: The following is a guest post from Yahoo Finance guest contributor Brian Sozzi. He is the CEO & Chief Equities Strategist of Belus Capital Advisors.
How has YOUR Polar Vortex-ridden winter been? Watching a water main break poison your water supply from down the road? Busted pipe in the house that cost $500 to replace? Blown out tire with a bent rim, perhaps? While you want to blame meanie Mother Nature for all of these unplanned expenses, part of the blame must be placed on the decades of underinvestment in the U.S. infrastructure. Obviously, that infrastructure will only get worse after the latest brutal winter.
Former Department of Transportation Secretary Ray Lahood tells Breakout, “the roads are in a complete state of disrepair. This is a crisis in America. It needs attention, we need to find the revenue we need to do it now."
Lahood’s prefered solution is a $0.10 hike to the gas tax. From there, he says, tie it to the cost of living and raise the tax each year. LaHood notes “if congress would have indexed the gas tax in 1993 when it was raised we wouldn’t be having this problem now. We’d have the money.” And there’s the rub. Add infrastructure repairs to the growing list of hurdles Washington simply can’t seem to clear.
That’s not to say they aren’t trying. President Obama has outlined a $300 billion plan to fix the country’s roads and bridges and Chairman of House Ways and Means Rep. Dave Camp included infrastructure in his tax reform plan.
Of the two proposals, LaHood says “both those plans talk about increased revenue. Not nearly enough but at least it’s a start.”
So what exactly is the problem with America’s infrastructure? Here are seven alarming facts you should know.
- The American Society of Civil Engineers 2013 grade for America’s drinking water infrastructure was a 'D.'
- The U.S. Inland Waterway System, maintained by the Army Corps of Engineers and totaling 12,000 miles in length, have lock systems that are 30 years past their expected useful life.
- Department of Homeland Security’s National Risk Profile stated in a report last year that the U.S. infrastructure is a risk to the nation and economy.
- American Civil Corps estimate that $3.6 trillion of investment is needed by 2020 to counteract deficient infrastructure.
- Only 11% of the nation’s 607,000 bridges are structurally efficient.
- The average age of bridge in the U.S. is 42 years old.
- According to reports, federal, state, and local governments need to increase bridge investment by $8 billion annually to meet the need of decaying infrastructure.
And here’s a bonus…The Highway Trust Fund, created by the government to maintain U.S. infrastructure, is on a path of insolvency by summer 2014. Without an injection of fresh government funds, the fund will rack up a $77 billion deficit through 2019 and $172 deficient through 2024.
The stone cold truth is that the U.S. citizenry will have to pay up for the privilege of traveling over bridges, and under tunnels, safely. A much higher gas tax than the 28.4 cents a gallon being discussed on Capitol Hill (current 18.4 cents plus 0.10 hike) is a foregone conclusion if the indexing factor also comes into play. The tax must counterbalance fewer miles driven by passengers due to more mass transit options, more fuel efficient automobiles and electric cars from Tesla and others, as well as a reborn U.S. infrastructure to support an estimated 100 million rise in the U.S. population by 2050.
Profit from the Potholes
To help offset those looming higher taxes, I have dug up five stocks that could benefit from the crumbling infrastructure. Use these as starting points for further research into each company, or similar companies.
Autozone (AZO) has about 30% of its store base in storm-ridden states AND many of those stores are open 24/7. Same-store sales, a key metric for retailers, continues to outpace that of closest rival Pep Boys (PBY).
WD-40 (WDFC) products not only keep infrastructure-related machines greased, but it owns Lava…the soap that is a friend to the dirty, beat up hands of construction workers. The company has recently successfully raised prices globally.
Monro Muffler Brake (MNRO) has 71% of its sales coming from tires and maintenance. Not only is the company benefiting from solid tire and maintenance sales, but there could be a rebound in vehicle servicing over the next 12-months. Motorists may finally realize that to survive another harsh winter their cars have to be in better shape.
Martin Marietta (MLM) derives 88% of its sales from sand and gravel shipments. Here is your pothole-filler play. Recent acquisition of Texas Industries will give the company a significantly greater presence in the cement market.
CSX (CSX) is the bestie of the newly-enlarged Martin Marietta I just mentioned. The company ships sand and gravel to bring in 59% of its annual business. Further, its route network is smack along the weather infected, in need of supplies, East Coast.