Obama’s Infrastructure Is Your Opportunity: URS

People are once again optimistic in this first full week of 2009.  Having gained a few pounds during the holidays, wives think they can shed the weight by mere will power and diet.  Not completing the last set of home improvement projects, husbands think they can knock out those undone tasks.  There’s just something about the change of the calendar.  For whatever the reason, everything seems more possible after January 1.

Mr. Market also has renewed hope.  After the worst year in memory, traders are thinking to themselves, “It can’t get worse than that.”  Still, we are in a very challenging economic environment.  Just Monday, President-elect Barack Obama said the economy was “bad and getting worse.”  Does he really think so or was he trying to sell his $800 billion stimulus program?  We don’t know.  Nevertheless, it’s a needed reminder to investors under the influence of good vibes: Don’t fall prey to an ethereal optimism.  If you are a buyer, you still have to be smart.

That’s why we’re going back to the fundamentals.  Instead of throwing money at the Dow when everyone is feeling good, you should be more tactical.  Here’s what I mean.  Legislation on the scale of Roosevelt’s New Deal will be awaiting Obama’s signature in the weeks following his January 20^th inauguration.  This week, he unveiled plans for a public works construction behemoth on the scale of the interstate highway system.  Obama hopes to resuscitate the ailing economy by repairing roads and bridges, while employing technology and various “green” workers.  In short, he wants the U.S. government to spend its way out of this economic morass.

Surveying the financial landscape, we looked for sectors and companies that could take advantage of these developments.  Engineering and Construction (E & C) seems to be a great place for the near and intermediate term.  In recent months, high materials costs hindered profitable construction projects.  With newly reduced costs and greater opportunity via Obama’s building projects, E & C companies are looking forward to a much-needed bounce.

An Engineering and Construction Darling

One of the best E & C opportunities is URS Corporation (URS).  A $9 billion company, URS makes their money via a unique revenue stream that should garner plenty of business from the new administration.  Construction, defense, engineering are all industries that could grow despite a struggling economy.  URS Corp takes advantage of those trends while achieving a diversity of revenue streams from government projects.    

That’s probably why URS popped in recent weeks.  Unlike almost every other company, URS bottomed out in October.  As the indexes fell further in November, URS held its own.  It climbed from $20 in October to close at $37.85 today – and we don’t think it’s done for the year.  Additionally, the pullback of the last two days is handing you a low-risk entry point.  If you’re looking to profit from Obama’s historic infrastructure projects, look to URS.