July 22, 2021: How Government Spending Can Turn Into Investment Gains - Cabot Wealth Network

July 22, 2021: How Government Spending Can Turn Into Investment Gains

government spending


The webinar was recorded July 22, 2021.


You can find the slides here.


Chris Preston [00:00:04] Hello and welcome to today’s Cabot Wealth webinar, How Government Spending Can Turn into Investment Gains. I’m your host, Chris Preston, Chief Analyst of the Cabot Wealth Daily advisory and Vice President of Content here at Cabot Wealth Network. With me today is Nancy Zambell, editor in chief of our Financial Freedom Federation magazine and Chief Analyst of our Wall Street’s Best newsletter’s. Today, Nancy is here to talk about the specifics behind the trillions of dollars the current administration is spending, which sectors will benefit most and more importantly, how to profit from it. This is an interactive webinar, which means we will be fielding your questions after Nancy’s presentation concludes. So if you have a question, feel free to ask it at any time and we will try and get to as many of them as time allows once Nancy wraps up. Just keep in mind that we cannot offer advice in regards to your own personal investing situation or portfolio.

Chris Preston [00:00:59] First, let me introduce Nancy, Nancy Zambell has spent 30 years educating and helping individual investors navigate the minefields of the financial industry. She has created and are written numerous investment publications, including Undiscovered Stocks, Untapped Opportunities and Nancy Zambell’s Buried Treasures Under Ten Dollars. Nancy has worked with MoneyShow.com for many years as an editor and interviewer for their onsite video studios. As a lecturer and educator, Nancy has led seminars for individual investors at the National Association of Investors, Investment Expo and the Money Show. She has also taught finance, economics and banking at the college level and has been quoted extensively in the Wall Street Journal, Investor’s Business Daily, USA Today and BusinessWeek. Nancy’s book Make Money Buying and Selling Stocks is an introduction for new investors and a reminder for experienced investors on how to profit in the stock market. Bottom line, Nancy knows what she’s talking about when it comes to all things investing. So I’ll let her do just that, Nancy. Take it away.

Nancy Zambell [00:01:59] Thank you, Chris. I hope I can live up to that introduction, although I do wish he wouldn’t say 30 years. Geez, makes me sound ancient. Thank you, Chris. So, anyway, spending bills, we don’t know what the spending bill is going to end up being. You know, the Democrats and the Republicans are all fighting about it today, but. The one that’s currently I’m trying to get my page down to work, OK, is not working. All right. Let me try this shoot anyway, I’ll just say this, that we don’t know what is going to be I’m going to talk about it in depth as to the one that was talking about right now, which is around four point one trillion dollars.

Nancy Zambell [00:02:46] Before I get into that, I’m just going to talk a little bit about our publications, because some of you may not be familiar with some of the newer ones. So the Financial Freedom Federation is our mission is to really educate everybody on personal finance as well as business finance and investments. And so we have a magazine which is called Financial Freedom Magazine, which comes out on a monthly basis. I just finished the issue for August. And I think that one’s going to be very interesting to people. I’m not going to give you a sneak preview, though. You’re just going to have to wait. But we’ve talked about a lot of different things within the Financial Freedom pages, estate planning, taxation, investing, as I said before, traveling, I think was last last month’s article in all about traveling and how to save money, how to maximize your dollars when you’re doing that. And it’s been a really fun publication to write. Of course, The Wall Street’s Best Digest newsletter has gone through a lot of name changes. It’s still the same one. I look at about a thousand newsletters a month from contributors, most of whom I’ve known for over 25 years, and they allow us to excerpt from their newsletters and from those newsletters I choose 40 different investments that I want to recommend to you guys. And then the two newest ones are the Wall Street’s Best Stocks and the Wall Street’s Best ETFs newsletter. And those are basically pulled from the pages of the Wall Street Best Digest. And I go through and I look and see what all these stocks and ETFs have done. And if they were as of today, when I recommend them, I look to see if I still think that they’ve got enough legs left to give you at least a 30 percent profit. And those have been fun to write too because it’s getting me back to my my roots of actually recommending individual stocks. And let’s see, we talked about those.

Nancy Zambell [00:04:43] Now, let’s go on to infrastructure, so today, as well as of last night, the plan was four point one trillion dollars. It was three and a half trillion tacked onto the already six hundred billion dollars that Congress has sort of agreed on. So the things that Biden wants to do on them is to focus more on a human infrastructure programs that one, expand Medicare funding and coverage, support, affordable child care, free college education initiatives, create pathways for employment and transform the country’s energy system to address climate change needs. Now, is it going to get all that stuff? Of course not. Now it’s and I don’t I’m not Democratic or Republican. So take this with a grain of salt. I look at this these five points here and I say, OK, what could possibly get done? And I’m thinking there may be some child care initiatives. I mean, there was already a check given to people for child care last month. There’s probably going to be a few more free college education initiatives. I don’t know how you create pathways for employment. I don’t think anybody else does either. The energy system, the infrastructure systems are desperately in need of dollars. I think that of all of these things, that’s the one that the Democrats and the Republicans will eventually agree upon. How much money goes to that? I have no idea, as does anyone else, because what happens is when they propose these deals and they tentatively agree, like they did about a month or six weeks ago, then everybody starts adding things onto those bills and that creates confusion. And everybody is fighting game with each other and they can’t come to a conclusion on what they want to do. However, we do have them in the state of Tennessee where I live, they passed several years ago and with a Republican governor, by the way, that they would do free college for two years at a community college level. And then they expanded that. If you wanted to go to a four year school, they would pay for the first two years of it, depending on what your your grade point average is. And so I’m going to I think in that more of that is going to happen across different states across the nation. And other than that, I don’t see expanded Medicare funding. I mean, it could happen, but I seriously doubt it. And the pathways for employment assistance, I don’t know. I don’t even know what that means. I mean, you have to go back down to the corporate level in order to induce corporations to hire people. And right now, as you know, you walk down the street and every single retail and restaurant business has a for hire sign out there. And so if we can’t hire people now, I don’t know what they’re planning on doing on the government level. I don’t think there’s anything they can do.

Nancy Zambell [00:07:26] OK, so where is that money going? That four point one trillion dollars? First of all, highways, bridges and airports. And if you’ve ever heard me speak about this, I’m repeating a lot of the same things that I’ve been saying for years, that currently forty three percent of our public roadways are in poor, mediocre condition. Forty two percent of the six hundred and seventeen thousand bridges in the United States are more than 50 years old, and seven and a half percent are structurally deficient. That means there’s a whole lot more that really needs some work on them. The structurally deficient, or they could just collapse at any time. You’re familiar, I’m sure, with the bridge that connects Memphis, Tennessee with Arkansas and that has been shut down for a number of weeks. I’m not sure if they’ve actually got it open or not. Last week they talked about getting it open in the next few days. And I mean, that’s a massive bridge. And they were serious cracks in that thing. And you wonder, does anybody inspect this stuff? I mean, we’re just waiting for a major accident to happen. Also, none of our airports are rated in the top twenty five in the world. That’s pretty pitiful. The plan, the current plan is devoting one hundred and thirty four billion dollars to modernize the highways, roads and main streets. That’s twenty thousand miles, which is just really a drop in the bucket. It will fix the 10 most economically significant bridges in the country that are in need of reconstruction will also repair the worst ten thousand smaller bridges. And, you know, that’s a. Ten thousand and ten bridges out of six hundred and seventeen thousand. And it’s going to allocate twenty five billion to airports for terminal renovations and multimodal connections. Their plan is that when they do this, renovate the airports and and have more connections to them, that the airfares will go down. I don’t believe that. And I’m sure you don’t either. The only time we saw that was during the covid pandemic. I remember years ago I was living in Florida. We were told that they had all of these new bills to provide toll roads. And as soon as the toll road was paid for with the tolls collected, it would no longer be a toll road that has yet to happen. That was over 30 years ago. So, you know, when the government says, I’m here to help you, you have to turn a blind eye to that.

Nancy Zambell [00:09:44] Next, water infrastructure, there’s a water main break every two minutes in the United States and the tons, gallons of treated water is lost each day, enough to fill nine thousand swimming pools. And those are just major catastrophes when they happen and when they do happen, everybody has to boil the water. So it’s also an inconvenience and could be a serious health risk. I mean, years ago, there was a lead in the water in Milwaukee. And then you remember the one in Flint, Michigan, just a handful of years ago killed a lot of people. So there’s just so many other things that come into being other than the water’s cloudy. It can also be hazardous. So this plan includes fifty five billion dollars to deliver clean drinking water to 10 million American families and more than four hundred thousand schools and child care facilities. And they’re going to focus on removing lead service surface lines and pipes.

Nancy Zambell [00:10:37] Next on the digital infrastructure, broadband and Internet. For many years, for about 20 years, I lived in a really rural part of Tennessee. I’ve moved closer to the city now. And I’m actually you all know probably that I have a real estate company and I’m just opening the second office up back in that rural area. And my two choices for broadband, really my only choice for broadband was Comcast. The other choice for DHL is a local telephone company. And they the broadband is good, the local telephone company, I wouldn’t take it if they gave it to me for free. Been there, done that. But here’s the interesting thing about it. Yeah. They’re trying to bring broadband in and certainly once competition gets in, that’s going to be great. But for right now, my Comcast bill is four times the bill that I pay where I currently have my office at, which is near the city, as I said. So it’s interesting. More than 30 million Americans live in areas where there’s absolutely no broadband. The plan is to spend sixty five billion dollars to build high speed broadband infrastructure to reach 100 percent coverage. Will it reach a hundred percent coverage? Probably not. It’s going to take a long time. But I mean, they’ve really made pretty great strides, though. It will also promote competition and reduce costs to consumers that I don’t believe. Seeing is believing. Right.

Nancy Zambell [00:11:59] And now the power grid infrastructure. The problem is that technology and consumer preferences are outpacing what the infrastructure is capable of. I mean, we have so many devices now with Iot, the Internet of technology, our Internet of things, everything being connected. I mean, even the refrigerators, they’re almost at the point where they can make you breakfast if you select your butter and eggs. But it’s causing a lot of stress on the on the grid. So 60 percent right now of our distribution lines in the U.S. have already surpassed their 50 year life expectancy. So we’re estimating that we need to spend one and a half to two trillion dollars by 2030, which is only eight and a half years away. The plan is to allocate seventy three billion, which, as you can see, is a drop in the bucket to build a more resilient electric transmission system, to spur jobs and to build next generation industries in distressed communities. You know, 5G is the newest platform technology. And that’s being slowly rolled out. T-Mobile is ahead of that, although most industry analysts don’t really say that. That’s the total. 5G is just the beginning of it. So we’re going to see a lot more of that. And that will also help with connectivity.

Nancy Zambell [00:13:15] Next in the public transit, passenger and freight rail, some of the problems right now really come down to marketing. Not everybody wants to take a train. You know, most of them are dirty. And, you know, you’ve got to wait around. They don’t get there on time. People still want to be socially distanced with the resurgence of covid. And the next thing is commuters are spoiled. Now, you know, we want more comfort and luxury and clean trains so they have a marketing issue. The trains also need to be digitized. That’s a massive project. They want to increase the line capacity and also lower cost. The plan is to allocate one hundred fifteen billion dollars to modernize and expand the transit rail networks. Public transit is going to get forty nine billion passenger rail, 66 billion. Really, nothing’s been done to the public transit system for many, many, many years. And then we have the additional programs, eighty nine billion is going to go to environmental remediation. Well, twenty one billion to that, 20 billion to infrastructure financing, 16 billion to ports and waterways, big security risk at our ports and waterways, 11 billion to safety, seven and a half billion to electrical vehicle infrastructure, electric busses and transit. Seven and a half billion Western water storage, five billion. That’s a real problem. As you know, with all of the fires that they’re fighting out there, there’s never enough equipment or water to handle them. And reconnecting communities, one billion dollars.

Nancy Zambell [00:14:53] So what industries are set to benefit? Well, obviously, construction, residential and commercial construction companies, industrial construction companies, water utilities and contractors, broadband businesses, clean energy companies and home health. It’d be interesting to see what happens with home health. There’s actually a lot of competition in that area right now, but I couldn’t really find any companies to recommend in that area that I liked. So here is the one that I’m currently looking at, the first one is American Water Works, and I actually looked at this company. I followed it for quite a while on one of my previous newsletters, actually went up to visit them in New Jersey. It was a much smaller company at the time. Now it’s one of the mega billion companies. The company basically handles water and wastewater and they’re active in seventeen hundred communities and 16 states. They’re having a conference call on August 3rd for their quarterly earnings report. And right now they’re estimated to earn a dollar nine on one point one billion dollars in revenue. It’s always been a great stock.

Nancy Zambell [00:16:01] Crown Castle, very active in the telecom area. They lease more than 40,000 cell towers. They have more than eighty thousand miles of fiber. So you’ll be hearing their name a lot. The stock has really progressed a lot, but I still think there’s something left in there to go. It pays a dividend, two point six five percent. Its second quarter funds from operations, which is what how rates actually project their earnings instead of earnings per share. So a dollar seventy one, the estimate was a dollar sixty six. So they beat and they posted revenues of one point five eight billion dollars.

Nancy Zambell [00:16:40] The next one is Macquarie Infrastructure. You’ve probably heard of them and they have an aviation outfit. They sell natural gas, but they’re selling the aviation outfit, The Atlantic Aviation, to KKR for almost four and a half billion dollars. They do engineering products for water and wastewater. They’re a global company and their earnings are due on August 3rd. Analysts are expecting sixty two cents per share on one point three one billion in revenues.

Nancy Zambell [00:17:11] Next one. Xylem is a company that I also followed for a long time. And that company I’m trying to find my note here. I think I messed up there. I think. Yeah, well, anyway, Xylem is a company that I followed for a long time. They’re also in the renewable energy water business. Their earnings are due July twenty ninth and they’re expecting fifty three cents per share on nineteen point three seven in revenue.

Nancy Zambell [00:17:40] And then you’ve got T-Mobile, which I mentioned earlier, with the 5G, obviously a global telecommunications company. They’re trading near their 52 week range now, doing very well. I think that they’re they’re promoting themselves as the leader in 5G. We’ll find out when the other companies really jump in more than what they have been doing.

Nancy Zambell [00:18:02] M-Y-R-G, is M-Y-R Group. They’re electrical construction services all throughout the United States and Canada. And again, trading up close to the 52 week high.

Nancy Zambell [00:18:14] The last one is Atlantica Sustainable Infrastructure. You may not have heard of them. They’re a company out of Great Britain. They pay a four and a half percent dividend yield and they do renewable energy, natural gas, water engineering products. And, you know, another company that I think is just really, really just starting to take off.

Nancy Zambell [00:18:39] So that’s what that’s what I have to talk to you about today, so, Chris, do we have any questions?

Chris Preston [00:18:46] We’ll get to questions in just a minute. First, and then to give you a chance to catch your breath while you go over what’s on the slide here. Yes. So for anyone who’s interested in what you’ve heard, the interest in signing up for any of Nancy’s Wall Street’s Best newsletter’s. We have a special all in one introductory offer reserved exclusively for listeners of today’s webinar. You can try the first 30 days for just one dollar and in exchange, you join Cabot’s Federation Platinum Club, which includes the Wall Street’s Best Digest, which is an investment advisory published monthly with specific advice and stock recommendations from the top two hundred Wall Street investing gurus. Wall Street’s Best Stocks, which is a monthly advisory about the best stocks for your investing consideration, including regular advice about how to manage your own portfolio, and plus your Federation Platinum Club charter membership gives you all the benefits of the Financial Freedom Federation Gold Club, which includes the Financial Freedom Magazine, investor briefings, premium reports and more. So, again, if you’re listening to today’s webinar, you can try out Federation Platinum Club for just 30 days for just one dollar. So act now by visiting this this link on your screen, CabotWealth.com/webinarspecial to receive your special introductory offer.

Chris Preston [00:20:16] Right now, let’s get to your questions. Let’s see. Let me start with one. Here’s a question. “I don’t see any solar, wind or electric vehicle stocks on your recommended list. What are your thoughts on these industries?”

Nancy Zambell [00:20:34] I think they’re a little riskier than some of the energy companies, but I also think that several of them stand out and look pretty good. I just didn’t have room to talk about all of them today. But here’s a few more that I’ve looked at. And I and I like Clear Way energy, which is CWEN. They do solar and wind. Canadian Solar, CSIQ. And Nio, which the symbol is NIO, which is the electric car company that’s trying to give Tesla a run for their money. There are many, many solar stocks out there, not as many when you know you are familiar with all the electric vehicle stocks. So, you know, those are speculative, definitely more speculative in nature than the other stock ideas that I gave you today. But if you’ve got a large portfolio and you could afford to invest in some of the speculative companies, why not? Try one or two with a very small amount of money and see how you do with them?

Chris Preston [00:21:27] Yeah, and we have a new we have a new advisory, actually, that’s devoted to those kinds of companies, to ESG investing. Specifically, it’s called our Sector Xpress Greentech Advisor run by Brendan Coffey. So if you’re looking for those kinds of recommendations specifically, that’s a good place to look. Absolutely, yeah. OK, let’s see. “Realistically, how close do you think the latest bill resemble the actual funding?”

Nancy Zambell [00:22:01] Not very close? I think it’s probably going to be less money, probably a lot less money than what Biden wants. And as I said before, I think you’re going to see it more towards the infrastructure than all of the other what you might call the touchy feely stuff that he wants to do with home health care and child care credits and that kind of thing. I don’t know how long this is going to take, you know, but they’ve been working on it for a long time now, really ever since Biden got elected. And then before that, they’ve been Trump talked about infrastructure for years and nothing was ever done with it. But we’re I think we’re running out of time with it. We’re going to get to the the time when it’s just it becomes a desperate measure. And we’re going to have to do something really quick before some major catastrophe happens. But again, if we get half of it, I think we’ll be lucky.

Chris Preston [00:22:50] OK, so, “Many of your stock recommendations that you listed are close to their 52 week highs. How much higher do you think that can realistically go in this market environment?”

Nancy Zambell [00:23:04] Well, it’s tough to say it on. The market has been a little itchy in the last week or so. And we had a pretty good losing day one day last week and it sprang back that week, which is a good sign. I know Mike Cintolo wrote something about it this morning and Cabot Growth Investor. And he still feels fairly bullish. Though, as I said last week on the prime call, it’s definitely not a dartboard market. It’s one that you’ve really got to judge and review and research the stocks before you put your money into them. I always want to look at a 30 percent return when I recommend a stock. And I realize some of these stocks are pretty high now. But I do believe that they’re stable, fundamentally strong companies and that they can still reach at least 30 percent higher.

Chris Preston [00:23:52] OK, so. “Is there one sector or sub sector of the ones you mentioned that stands out as benefiting most or most likely to benefit from this new plan?”

Nancy Zambell [00:24:07] I think probably the water sector, because everything is so ancient. I mean, most of the water infrastructure was built in the back in the late 50s and early 60s. So we’re talking about a number of years now. And with the number of water main breaks every day, it is quickly becoming a crisis situation. So I think we’ll see a lot of that. And telecom. That would be my two big picks.

Chris Preston [00:24:31] OK, here’s more of a general question, “How are we going to pay for this bill?”

Nancy Zambell [00:24:38] Well, guess who’s going to pay for it? I guess that’ll be yes, you and me. What what Biden is proposing is, of course, taxes, which none of us want to pay more taxes. He’s saying maybe divert the unemployment, the current allocation, unemployment funds that aren’t going to be spent. Now, I don’t know how much is actually left in that pocketbook. No. A lot of states, including Tennessee where I live, has cut off the extra unemployment a little bit earlier than what the federal government was going to do. He also wants to redirect some of the relief funds that are in the 2020 budget. And, of course, we’re depending on state and local municipalities to fork over some money for it too. And so we’re we’re going to be taxed at the state, local and federal level. If we have we are subject to all of those taxes. He said there’s some money to be had in a 5G spectrum auction, which is true. And then, of course, he wants to reach out to the public for public and private partnerships. And I think we’ll see more of that. I mean, even on a local level, I’m already seeing a lot of those things where the government used to step in and provide a lot of things, like, for instance, down here, the government has has funded these. Now here they call it TCAT, which is that Tennessee College of forgot what the rest of it is. But it’s basically a vocational school. So the government has typically put all of their money into that and mostly local and state governments. But down here in Maryville, Tennessee, they’ve actually reached out to corporations who are now joining with that educational effort and they’re sponsoring a lot of the money that goes into the programs. And better than that even is that they’re working hand in hand with educational providers, because if you have a big manufacturing company, you know what kind of workers that you need. So they are telling the educational folks, you know, we need more welders and we need more of this, we need more of that. And so that’s how they’re they’re structuring their educational programs to provide the employees that the local manufacturers need, which I think is a wonderful idea. So I think we’re going to see a lot more of that just because, you know, there’s a limit somewhere to what the government can spend.

Chris Preston [00:26:59] Here’s a question from Daniel. He asks, “Do you have an opinion on Tetra Tech ticker symbol TTEK, a water consulting and engineering services company?”

Nancy Zambell [00:27:10] I don’t. But let me just take a look right here.

Chris Preston [00:27:14] I mean, it’s obviously in the water. You talked about …

Nancy Zambell [00:27:20] Looks like they’re getting ready to do their their conference call just in a few days on July 28. But yeah, I mean, I don’t really know anything about the company. I know that it’s been selected in the Wall Street’s Best Digest several times, but it’s been quite a while since we’ve seen it. They did just get a new 37 million dollar contract, which I think bodes well for them, and that is through a U.S. Agency for International Development. And this is for Columbia, so that’s kind of interesting. Of course, you know, the Third World countries have a real water problem, and that’s something that Bill Gates has been working on, too, with his foundation to make potable water out of water that is not. It’s easy for us to say, well, we should stick to the United States and do what we do best here, but we’re a global economy now. So you’re going to see more companies reaching out, I think, to people in some of these undeveloped countries to help them out because, you know, as a global economy, we’re all dependent upon each other. And so I think that we’ll see a lot more interest in that. But I mean, it looks pretty interesting. The chart doesn’t look bad on it, so. Yeah.

Chris Preston [00:28:36] OK, here, we’ll do one, one or two more questions. Here’s one that it’s a bit fraught, but I think you’re the perfect person to answer this, Nancy, since you said you’re neither Democrat or Republican, “Do you think this list of sectors of benefit from the spending bill would look a whole lot different now if Trump had been reelected?”

Nancy Zambell [00:29:01] Well, I don’t honestly don’t know that we’d even have a list, because I don’t know that we’d have an infrastructure bill. You know, I think that it doesn’t matter, really, who is in, because here’s the problem. The problem is that our infrastructure is hopelessly out of date and we need to do something about it. And whether Biden lasts four years and a Republican comes along, hopefully if that happens, we’ll get somebody who is interested in finding the stuff, is what Trump always said he was, but he never did anything about it. Biden, at least, is trying to do something about it. But no, I don’t think the sectors would change much because these are the ones that really need the help.

Chris Preston [00:29:39] Yep, OK, well, thank you, Nancy, and thanks to everyone, for tuning in with your questions. And as you see on the screen, next month is our annual Smarter Investing, Greater Profits Conference. Those who’ve been before may know it is the Cabot Wealth Summit, but this year we’re combining both Cabot and Financial Freedom analysts which is 12 analysts in all for a three day online conference from August 17th through 19th that features all of our expert investment analysts, including Nancy, as well as each of their stock picks for the coming year. So for more information on that or to sign up at CabotWealth.com/summit. Again, that begins on August 17th, online this year for the second year in a row. Unfortunately, it’s better when it’s in person, but, you know, being as safe as possible. Nancy any last words before we before we close up.

Nancy Zambell [00:30:42] Now, I just want to say thank you. And at the conference, I’m going to be doing my beginning investor seminar again. So hopefully those of you that are not that familiar with investing and even some of you who are very familiar with investing, you always tell me that you learn something from it. So I’m looking forward to seeing you guys there and sharing some more stock picks with you.

Chris Preston [00:31:01] Yeah, Nancy will kick things off at at 10:00 a.m. Eastern on the 17th. So she’ll she’ll be leading off the conference, as usual. Thanks again. That does it for us, for Nancy Zambell and the entire Cabot Wealth Network team, I’m Chris Preston, and we’ll see you next time.

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