Buy these four stocks and claim an American empire

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Today’s issue in preview:

• Buy these four stocks and claim an American empire

• How to play the AI boom and earn lots of passive income at the same time

• America’s megabanks just reached new all-time highs. Here’s why that’s bullish

• Learn our Top Themes to buy now

Buy these four stocks and claim an American empire

Credit: Avalon_Studio

Over the past six months, we have written more than a dozen research notes that analyze the Made in America megatrend and individual stocks poised to benefit from it.

Some of our “picks to click” in this trend include manufactured parts marketplace Xometry (XMTR), welding equipment/service giant ESAB Corp (ESAB), and testing/certification blue chip UL Solutions (ULS).

The golden thread running through these recommendations is that they stand to greatly benefit from a 10+ year trend of increased investment in American manufacturing capacity.

Constant Money & Megatrends readers are familiar with the bull case for this “Made in America” megatrend.

President Donald Trump – along with many business and military leaders – believes that the U.S. has outsourced far too much of its industrial capacity to China over the past 25 years.

We outsourced significant portions of our semiconductor, appliance, medicine, weapons, and machinery production. We outsourced the capacity to produce and process critical resources, such as rare earth elements.

The COVID-19 pandemic showed that depending on other countries for critical economic inputs makes the U.S. economy less safe and secure. To put it bluntly, it is very stupid to not make products critical to national security like AI semiconductors within our own borders.

Trump has staked his legacy and reputation on expanding our industrial base… and he’s working with business leaders to invest trillions to pursue this goal. Apple (AAPL), for example, has committed to invest $600 billion in U.S.-based manufacturing over the next four years. Nvidia (NVDA) says it will invest $500 billion in U.S.-based manufacturing over the next four years.

As you think about investing in this megatrend, don’t forget about the enormous amount of “building ingredients” necessary to build trillions of dollars’ worth of AI data centers, factories, bridges, distribution centers, power plants, roads, and electrical grid components needed… and how it is bullish for blue chip cement and construction aggregate suppliers like CRH (CRH) and Amrize (AMRZ).

In today’s high-tech world of iPhones, ChatGPT, video streaming, and Instagram, it’s easy to forget our world is built on a low-tech foundation of steel, concrete, copper, and lumber.

Concrete, in particular, is a wonderfully cheap, useful, and versatile building material. It is literally the foundation of skyscrapers, warehouses, data centers, bridges, factories, highways, office parks, shopping malls, and parking garages. If you’re bullish on American manufacturing, then almost by default, you are bullish on the concrete business.

CRH ($67B market cap) and Amrize ($26B market cap) are giants of the concrete and construction aggregates (sand, gravel, crushed stone) business. They are either #1 or #2 in most of North America’s most valuable building markets.

Together, they supply a large portion of the concrete poured in North America. They also supply asphalt, roofing materials, and various construction materials. It’s a dirty, unglamorous business, but it’s also an absolutely critical business.

Importantly, many of CRH’s and Amrize’s aggregate mines and production facilities are in coveted locations near America’s major metropolitan areas. This is key because construction aggregates are very heavy and therefore costly to transport over long distances. Transporting $5 million worth of gold and transporting $5 million worth of gravel are two very different things.

This attribute makes CRH and Amrize like construction aggregate giants Vulcan Materials (VMC) and Martin Marietta (MLM), which we’ve written positively in the past as excellent “inflation defense” stocks.

Each of these firms owns irreplaceable and valuable collections of mines and processing facilities near major metropolitan areas. These assets produce scarce, in-demand resources that cannot be printed or coded into existence. And they all benefit from increased U.S. infrastructure spending.

In fact, a focused “basket” of CRH, Amrize, Vulcan, and Martin Marietta allows you to own a huge portion of North America’s highest-quality construction aggregate mines and processing facilities.

Owning these four firms makes you something of an “American building materials baron” with extensive shareholdings that are virtually guaranteed to rise in value in step with inflation.

Owning a collection of gravel pits and sand mines isn’t as exciting as owning SpaceX or AI stocks. However, if you want to invest in the Made in America megatrend – plus play inflation defense by owning irreplaceable collections of scarce, in-demand assets – consider CRH and AMRZ.

How to play the AI boom and earn lots of passive income at the same time

Since we’re on the topic of building many new AI data centers and high-tech factories (see above), now is a good time to remember that all that infrastructure must be powered somehow.

And somebody must get paid to make it happen.

Why not you?

This is why owning oil and gas pipelines is one of our longest-standing, highest conviction, and most rewarding recommendations.

Avid M&M readers are familiar with our longstanding take on oil and gas pipelines. In early 2024, I saw the industry as the best way to generate substantial passive income from the AI boom. We’ve written over a dozen M&M updates about this trend.

Given AI’s enormous promise, large tech firms like Meta (META), Amazon (AMZN), and Microsoft (MSFT) are spending trillions of dollars to build the world’s best AI models and infrastructure. This year, they are on pace to spend over $700 billion on AI infrastructure, with more than $3 trillion expected to follow.

All that AI infrastructure is poised to consume vast amounts of electricity. S&P Global estimates that global electricity demand will increase by nearly 50% by 2040.

I’ve frequently mentioned that AI’s growing power demands are a bullish driver for natural gas, as it is the preferred clean-burning fuel for power plants that support AI data centers.

This is why I believe natural gas producers such as EQT (EQT),Antero Resources (AR),Expand Energy Corp. (EXE), and Range Resources (RRC) are compelling long-term stock ideas.

However, all the natural gas in the world isn’t worth much if you can’t transport it to customers.

This is where America’s vast natural gas transportation, processing, and storage industry comes in. An extensive network of pipelines crisscrosses America to allow energy companies to transport natural gas from the wellhead to power plants. If we get an AI-driven boom in natural gas consumption, we get a boom in natural gas transportation by default.

This year, the market has enthusiastically supported our thesis. Blue chip pipeline operator Enterprise Products (EPD) has returned 23% this year. Fellow blue chip operator Kinder Morgan (KMI) has returned 17% this year. Fellow blue chip operator Energy Transfer (ET) has returned 32%.

These individual stock gains have driven the pipeline operator-focused Alerian MLP ETF (AMLP) to a 21% year-to-date gain.

Despite AMLP’s big run and shares trading near all-time highs, it still yields around 7.3%.

The typical pipeline operator is not your conventional “high-risk, high reward” AI play. Instead, it’s a boring, predictable business that generates steady cash flows and shareholder distributions. And it’s getting an AI boost that will last for years.

Generating stable cash flows by transporting oil and gas isn’t as exciting as some high-tech industries, but it just works… and business is booming.

America’s megabanks just reached new all-time highs. Here’s why that’s bullish

Credit: J. Michael Jones

Oh boy… the bears and pessimists are going to have a hard time explaining away this one…

Two of America’s largest banking firms – JPMorgan Chase (JPM) and Bank of America (BAC) – just reached new all-time highs.

Since the current bull market in stocks began in early 2023, the benchmark S&P 500 has returned 89%. Market-leading themes such as semiconductors, memory, and optical networking have returned more than 300%.

During this entire bull market, a vocal group of high-profile bears and pessimists has warned investors to avoid stocks for various reasons that sounded important. However, the past three years have provided a powerful demonstration of the old market adage that “pessimists often sound smart, but it’s the bulls that make money.”

Sure, the American economy has imbalances and big problems. But making money in stocks is never the result of a problem-free economic environment. It’s always about being in an environment where the big problems are overwhelmed by the even bigger positives.

In the case of the U.S. economy, the big positives – world-leading innovation, world-leading oil and gas production, world-leading capital markets, world-leading educational system, world-leading agricultural sector, world-leading free-market enterprise system – are so powerful that its most important banks are booming and enjoying record-high stock prices.

I typically avoid owning individual banking stocks. Since I started trading stocks in 1997, I’ve seen too many seemingly strong and safe financial companies look good one day and then be crippled the next day… only for the investment community to later find out they were hiding or mismanaging liabilities.

However, I like to monitor the price action in banking stocks. The health of a region’s financial system can serve as a good barometer of its overall economic health… or at least a good gauge of all-important financial liquidity, which has a huge influence on asset price movements.

The stock market is the world’s greatest forecasting mechanism. It tends to look ahead 6-12 months. When an industry is in a recession, its stock prices will rise before the news media announces it is recovering. When an industry seems to be doing well, its stock prices will decline before the news covers its downturn. This is often called “discounting” or “pricing in” the future.

Applied to banking, when a region is about to start doing well, its banks will rise in advance of the good times. When a region is about to struggle, its banks will plummet in advance of the bad times.

JPMorgan Chase and Bank of America are two of America’s largest and most important banking conglomerates. Their fortunes rise and fall with America’s ability to start businesses, earn money, pay bills, pay back loans, and generally just “get along.” And right now, they are at all-time highs. This development is indicative of a strong U.S. economy. Invest accordingly!

Market Notes

• Our recommendation to invest in the Power Grid Upgrade megatrend continues to pay off. Electrical infrastructure giant Eaton (ETN) reached a new all-time high today.

• The Iran War and its constriction of refined oil products continue to benefit U.S. refining firms. Marathon Petroleum (MPC) and Phillips 66 (PSX) reached new all-time highs today.

• The Boomer health care megatrend continues to create stock market winners in many fields. Diagnostics giant Labcorp (LH) reached a new all-time high today.

• The Full Service Restaurant bull market continues. Brinker International (EAT, Chili’s parent) and The Cheesecake Factory (CAKE) reached new all-time highs today.

• Retail giant Target (TGT) reached a new one-year high today.

Regards,

Brian Hunt
Editor, Money & Megatrends

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