Obama Energy Report

It's been a sleeping bull for a long time.

But, until recently, the stock prices were simply too high to talk about investing in infrastructure stocks as a growth catalyst.

Now, the rules have been rewritten, the stocks have gotten a haircut, and infrastructure, as well as green energy, has become a possible economic savior.

On February 17th, President Obama signed the American Recovery and Investment Act of 2009. This economic stimulus emphasizes energy related investments and technologies with renewable energy, smart grid, energy efficiency, and electric-vehicle provisions.

Prior to this, House Majority Leader Steny Hoyer was asked what would be included in a proposed second economic stimulus package, Hoyer quickly rattled off four things on his shortlist:

• unemployment insurance

• food stamps

• health care/Medicaid

• infrastructure

He was clearly most excited about the infrastructure angle, as that was the only one he elaborated on. Here's what else he had to say about it (Hoyer's remarks in italics):

Infrastructure investment obviously creates jobs here in America. We are looking at projects that dirt can be dug in 90 days. Give me an example of a building project that can start within 90 days. Give you an example? We've got highway construction that is on hold in the state of Maryland because of a lack of funds. That's true also of some sewer systems. I was down in Louisville two or three weeks ago talking to the mayor and to the head of the sanitary commission down there. They have projects they can get underway immediately, fixing some of their aging sewer and water systems. So those are examples of things that will spur the economy and invest in the things that we have to invest in to make sure that our economy can grow and be successful. How big would an infrastructure program, say, have to be to make a real difference when we're finding out that $700 billion wasn't nearly enough to save the economy? With respect to how big the stimulus has to be, certainly it needs to be a substantial sum. We were talking about $100 billion last week, unfortunately the Senate republicans objected to that. We think that was a mistake. President-elect Obama has now said he wants a stimulus package ready for him by the time he is sworn in to office; I expect that we will do that.

This is clearly candid information. The second-highest ranking member in the House basically flat-out said the government would toss money at infrastructure project in an effort to immediately spur spending and create jobs.

Infrastructure Stocks: Battered Bellwethers

So what, exactly, were the predictions for the second stimulus?

I think Barron's hit it squarely in an article:

While it's still too early to know what form a plan like this would take - much less its price tag - it would probably focus on infrastructure projects across the country, both building new bridges, roads and municipal systems and repairing outdated ones. In the process, the plan could potentially create thousands of jobs and at least kick-start the economy until other initiatives took hold.

In reality, the price tag is a whopping $47 billion for spending on renewable energy investments, another $20 billion in tax incentives, including a multi-year PTC extension manufacturing ITC for the production of renewable technologies. Approximately $20 billion will be distributed throughout spending initiatives in relation to clean water. Additional funds include provisions that allow for renewable generation including solar, geothermal, biomass, and energy efficiency measures.

To get an idea of how to capitalize on this opportunity, you first must know what is included under the broad umbrella of 'infrastructure stocks.' I'd put the following sectors in that category:

• construction and engineering firms

• suppliers of concrete, steel, heavy equipment

• water infrastructure companies

• transmission companies/electric utilities and

• green infrastructure companies

I'd be looking for companies that dabble in more than one of those sectors, and have a successful track record of doing so.

Here's a list of the infrastructure stocks that I like:

• cABB Ltd. (NYSE: ABB)

• Fluor (NYSE: FLR)

• Jacobs Engineering (NYSE: JEC)

• American Superconductor (NASDAQ: AMSC)

• Foster Wheeler (NASDAQ: FWLT)

• The Shaw Group (NYSE: SGR)

And if it's not individual companies you're after, here's list of infrastructure ETFs and mutual funds:

• Kensington Global Infrastructure (NASDAQ: KGIAX)

• Kinetics Water Infrastructure (NASDAQ: KWINX)

• iShares S&P Global Infrastructure Fund (NYSE: IGF)

• First Trust ISE Global Engineering & Construction (NYSE: FLM)

• SPDR FTSE/Macquarie Global Infrastructure 100 ETF (NYSE: GII)

Infrastructure Stocks: The Bottom Line

Consider this: a 2005 study by the American Society for Civil Engineers (ASCE) concluded with a report card for all the United States's infrastructure systems.

On a cumulative basis, America's infrastructure G.P.A was a D.

The conclusion?

ASCE estimates that $1.6 trillion is needed over a five-year period to bring the nation's infrastructure to a good condition. Establishing a long-term development and maintenance plan must become a national priority. But in the short term, small steps can be taken by the 110th Congress, as well as state legislatures and local communities, to improve our nation's failing infrastructure.

To be frank, it's a national security issue.

Energy, Infrastructure, and Climate Change: New National Security Issues

It is a major national security issue.

That reasoning seemed to work the past eight years as countless, often unnecessary, rules and policies were rammed down American citizens' throats.

Secret wiretapping? National security issue.

Spying on peaceful protesters? National security issue.

Millions of missing White House e-mails just as investigations began into the politically motivated firings of U.S. Attorneys? Obviously a national security issue.

Just like those WMDs, right?

Of course, BILLIONS were made on those "national security issues." (OK, maybe not on the e-mails.)

Private security firms, military and spying software, and defense contractors have raked in billions as a result of our national security issues.

Thing is, you had to be willing to profit from lies, deceit, and destruction to go along for that ride. I certainly wasn't. And I know a few more like me.

Now, a new President is going usher in a new line of national security issues. The profit potential from these new issues will be equally as great as the old ones, only they're backed by truth, science, and goodwill-not greed and a get-rich-at-all-costs mentality.

New National Security Issues

To be clear, I'm not in favor of applying the "National Security" label to any pet project that needs public approval. But, that's the world we live in. Somebody has to herd the sheep.

The moral high ground has many loose stones. And the new administration will certainly use tools sharpened by their predecessors. Hopefully, they have a different end-game in mind.

So far, it looks promising.

Instead of wielding the national security tag to gain access to your e-mail, Mr. Obama has set his targets on less dubious threats: energy security and climate change.

The President has appointed General James Jones as his national security advisor. Jones is also the CEO of the Institute of the 21st Century, a group developed by the U.S. Chamber of Commerce to promote energy development and conservation.

That group sent Mr. Obama a report after his election asking him to usher in a new age of energy policy.

Here's an excerpt from that report:

"For over 40 years, the United States has had an inadequate, contradictory and shortsighted approach with our regard to our energy future. Energy is a national security issue and an international security issue of the highest order. Global demand will increase by more than 50 percent between now and 2030 - and perhaps by as much as 30 percent here in the United States. We must develop new, affordable, diverse and clean sources of energy that will underpin our nation's economy and keep us strong both and home and abroad."

Did you see the buzzwords in there? "Energy is a national security issue."

This is must be a top priority. Sound the alarms. Get your checkbooks ready. We have a new national security issue.

Surely someone, somewhere, is getting rich of this deal. Shouldn't it be you?

Basically, we're substituting First Solar (NASDAQ: FSLR), and EnerNOC (NASDAQ: ENOC), and a litany of other cleantech companies for Enron and Lockheed Martin (NSYE: LMT) here. It may not be exactly straight arrow, but it's certainly not war profiteering.

And energy security isn't the only new national security issue. We're also going to war against climate change.

Profiting from National Security Issues: A Quick Case Study

Major defense contractors have had substantial runs over the past few years, earning well over 100%, as they gobbled up government contracts to deal with our national security issues, namely the occupation of Iraq.

It's no surprise or coincidence that their rise in stock price correlates concretely to our invasion of, and prolonged stay in, Iraq.

Now, you could argue that these stocks began to decline along with the broader markets. But I'd argue they held up comparably well, and only started to decline upon the realization that a new president would be elected with drastically different national security issues.

With new national priorities, a new group of stocks is about to embark on a similar run.

Instead of defense contractors, it'll be cleantech companies that are receiving government meal tickets for the next few years.

It'll be the same profit opportunity, only with new players and a more positive end-game.

But you'll need to get your ducks in a row now in order to take advantage.

And you'd better hurry, because the money's being doled out.

Governors Grovel for Infrastructure Investment

You see, 41 of the 50 states represented by their governors at a recent meeting will be facing budget shortfalls either this year or next.

And the governors made very clear what they thought the best and most urgent solution to their woes should be: infrastructure investment, and lots of it.

The Governator made the case very clear, saying there is $136 billion worth of infrastructure projects that can be started right away.

In California, he said:

We have $28 billion of projects that are ready to go, literally putting the shovels into the dirt within a few months. I mean, America has not done anything when it comes to real serious infrastructure building in the last four decades. I think it's time that we get our act together and do it. This is a good opportunity, not only because it will build infrastructure, but also it creates great jobs and it gets the economy stimulated.

And stimulation is just what Arnold got via a possible new, equally expensive, economic stimulus.

What's guaranteed to be in the package?

The highlights include a $6 billion dollar loan guarantee program for renewable technologies, $4.5 billion for smart grid investment, $6 billion in funding for clean water revolving funds, as well as a $2 billion allocation for advanced battery manufacturing.

This is shaping up to be one heck of an investment opportunity, with the Federal Government as your co-signer.

But the governors in this group aren't the only ones touting an infrastructure and green energy spending plan.

Mr. Obama has nominated a host of cabinet members to push through his green agenda.

Obama's Climate Change & Energy Team

President Obama recently took to the airwaves to formally announce his climate change and energy team.

The appointees will be slated with carrying out the proposed aggressive energy approach that Obama has continued to harp on since the election, which has held true through the signing of this stimulus.

Here are some of the major appointments announced were:

• Nobel physics laureate Steven Chu, energy secretary

• Former EPA chief Carol Browner, Climate Czar

• Lisa Jackson, Head of EPA

• Nancy Sutley, head of White House Council on Environmental Quality

Right Away, Mr. President

It has clearly been right to work for this assembled cast.

After a briefing on the energy and environmental policy (if you can call it that), of the last eight years, it was right to the drawing board to figure out how to undo what's been done and set the country on a path of sustainability and energy security.

Although the stimulus has been passed, tackling energy reforms continues to be a daunting but necessary task if we're to avoid the serious consequences of climate change, and free ourselves of foreign oil's greasy grip.

Most scientists agree that emissions need to be cut 50% to 80% by the middle of the century. . . a seemingly impossible task.

Mr. Obama's goal is to return to our 1990 emissions levels (similar to Kyoto), by 2020, which would be a 16% reduction in the next 11 years, or 1.45% per year. That will also be tough to do, as emissions generally increase year-to-year, not decrease.

The most difficult part of the plan, however, will be convincing businesses and consumers they need to spend money now to save energy and emissions in the future-especially when the price tag is so large.

Energy Transition, Portfolio Transition

It's going to cost trillions of dollars.

And that means you can reap two-fold profits from Obama's energy policy.

First, you'll get the societal and ecological benefits of the projects just by being an American citizen.

But, if you're a savvy American citizen, you can reap monetary profits by investing in the companies that will be executing the Obama plan, namely renewable energy and infrastructure companies.

You see, stock prices have been beaten down the entire year as the world fought through a financial crisis brought on by greed and, essentially, facilitated by look-the-other-way Washington policy.

But it's this very financial crisis that will allow for massive spending in the energy arena.

Obama's plan (and it's already working), is to use the crisis as reason for a cash injection, similar to economic stimulus earlier this year.

Only instead of giving the cash to taxpayers, the money now goes to building out infrastructure and other projects that deploy renewable energy sources and increase energy efficiency.

And that government money-used to build out energy projects and create jobs-will end up on the income statements of related companies. . the same companies we follow here at Green Chip day in and day out.

If you're smart, you can turn this spending into your own personal stimulus.

Energy Infrastructure Stocks

You can bet that this infrastructure-centric stimulus has had something to do with these nice gains.

And while related stocks have already begun trending upward, there is still plenty more to come with the stimulus measures focusing heavily on money for infrastructure.

"The top priority is to invest in these areas," White House Chief of Staff Rahm Emanuel stated, citing roads, bridges, high-speed rail, water infrastructure, transportation systems, and green infrastructure as the areas of major investment.

And there's still time to get your portfolio positioned to take advantage.

Here are few more of the possible beneficiaries of an infrastructure boom:

• Emerson Electric Co. (NYSE: EMR)

• Eaton Corp. (NYSE: ETN)

• Robbins & Myers (NYSE: RBN)

• ITC Holdings Corp. (NYSE: ITC)

• United Technologies (NYSE: UTX) and

• Brookfield Asset Management (NYSE: BAM) (thanks to a reader for that tip)