42 Clean-Energy Stock Picks to Buy on Biden’s New Infrastructure Plan

Initial hype for infrastructure stocks wears off, leaving opportunity

Bank of America’s view that infrastructure stocks are underowned is supported by its Global Fund Manager Survey, which found in January 2021 that a net 33% of investors had outsized positions in industrials stocks — the highest level in close to seven years. But that fell to 12% in the latest survey, which Woodard’s team noted is just slightly above the long-term average. The industrial sector’s loss of momentum is also illustrated by the fact that it’s traded flat since May.

Clean energy stocks also enjoyed a robust rally to start the year driven by optimism about an infrastructure deal, but they too have pulled back precipitously. Though Biden plans to sign the long-awaited bill into law Monday, the iShares Global Clean Energy ETF (ICLN), Bank of America’s proxy for the industry, is still 25% off its January highs — even after a 17% rally since mid-October.

“Returns in the industries most likely to benefit from new legislation also show how much expectations have retreated,” Woodard wrote.

Though sentiment about industrials and clean energy stocks may have verged on exuberant earlier in the year, Bank of America now spots opportunities in both industries that investors can take advantage of.

The industrials sector should enjoy capital expenditure (capex) growth of 6% to 7% per year in the US, according to Bank of America. The renewed focus on “reshoring,” or bringing manufacturing services and capacity back to the US from overseas, can be seen in the nation’s $50 billion reinvestment in semiconductors this year, the note read.

“This type of capacity growth could drive some ‘catch-up’ in equipment spending relative to software over the next few years,” Woodard wrote.

Meanwhile, key tax credits for clean energy companies and utilities, including a three-year credit for solar investment and a five-year credit for wind production, survived the bill, Woodard noted. That should provide a boost to margins for companies in those respective industries. 

Stocks to buy as the infrastructure bill becomes law

Below are six industrials stocks that Bank of America said will benefit from a strong capex recovery in 2022 driven by the US’s recent reinvestment in technology capacity, followed by 36 buy-rated clean-energy stocks in the utilities, alternative energy, charging infrastructure, and liquefied natural gas (LNG) industries.

The firm highlighted four clean energy stocks in particular, while adding notes for the six industrials sector standouts. Along with each stock pick is its corresponding ticker and market capitalization with commentary for the selected names.