A Trillion Dollars Is Going Into the 'Keystone Plan'

Editor's note: In today's edition of our special Digest holiday series, we're featuring brand-new research from our resident resource guru, Matt Badiali.

Originally published earlier this month in the December issue of his Stansberry Research Resource Report, today's essay explains why the next four years could bring windfall profits for resource investors...

A Trillion Dollars Is Going Into the 'Keystone Plan'

By Matt Badiali, editor, Stansberry Research Resource Report

You probably see Bob Brownlee's "invisible empire" every day...

And if you're like most people, you think nothing of it...

In 1967, Brownlee was a Miami-Dade County cop. But he moonlit as night security at a construction site. He saw truckload after truckload of barricades delivered to the site.

These simple wood barriers earned their owners rent just by sitting on construction sites, shielding the workers from surrounding traffic. Brownlee knew a good business when he saw one... He figured he could throw together some barriers, then sit back and cash the rent checks. It sure beat driving patrols in Miami.

He went home and knocked some wood together in his backyard, stenciled his name and phone number on the front, and started a business with 25 handmade barricades.

Today, Bob's Barricades' traffic barriers are among the most common in the country. Brownlee sold the company for $1 million in the early 1970s. And by 2014, Bob's Barricades reported $35 million in sales.

The business went from 25 knocked-together wood stands to $35 million in sales based on a simple principle... People are going to keep building things.

That principle is still true.

For example, Florida's highways are going through major renovations. Today, the main route from east to west through Orlando – Interstate 4 – is getting a major face-lift. The "I-4 Ultimate" is the largest road-improvement project in the state's history. Over a 21-mile stretch, the state will work to build 53 new bridges, replace 74, and widen 13 more. Road crews will rebuild 15 major interchanges and construct a brand-new express lane. The project will cost more than $2.3 billion.

And Bob's Barricades will provide the traffic barriers for the entire project. Consider, a barrel-style road marker costs about a dollar per day to rent. The larger barricades cost around $10 per day. And this project is going to require an insane number of barricades. Bob's is going to make a killing.

I've seen this already this year...

The family and I drove home from Thanksgiving on I-95, and it was essentially 300 miles of construction... and 300 miles of construction barricades. I saw hundreds (if not thousands) of cones and barrels on that drive.

This roadwork can stretch on for months or years. Those barrels – which we could buy from a store for $32 – pay for themselves many times over.

Unfortunately, Bob's Barricades is privately owned. We can't invest in it. But here's the main point: Brownlee tapped into an important market. Workers always need road-construction barricades... because our roads are constantly under construction. Existing roads are under repair or being expanded all the time.

And now... that kind of construction is poised to skyrocket.

President-elect Donald Trump has promised to push forward a wide range of infrastructure projects in the next four years... like expanding highways, building airports, and laying down miles of pipelines. The companies that supply the raw materials and the equipment needed for these projects will be showered with billions of dollars of federal largesse.

In this issue, we're going to dive into who we think will be the winners in Trump's plan... which we've dubbed the "Keystone Plan."

What is the Keystone Plan?

During the run up to his improbable election last month, Donald Trump made a promise to make infrastructure a cornerstone of his administration. He repeated that pledge in his acceptance speech.

He has proposed a $1 trillion budget to build and rebuild roads, bridges, ports, highways, power lines, water pipes, etc... He talked about it during the campaign. It's a linchpin of his U.S.-jobs push.

You will hear a lot more about the Keystone Plan from us over the next couple of years. Particularly if it spurs the kind of bull market we expect.

Improving infrastructure would be a major win for a Trump administration. It'd make scores of blue-collar jobs for his voter base... It's a conspicuous sign of progress (it's hard to miss workers building a bridge)... And it would fit into his major theme of "making America great again."

If Trump can push the Keystone Plan through, the next four years could be the best we've ever had at the Stansberry Research Resource Report. The best in my career. We're going to make a lot of money riding this wave of investments. They'll go into all the things we need to improve our airports, roads, bridges, highways, and a lot more...

Trump's Keystone Plan calls for a trillion dollars invested in pipes, roads, ports, oil, coal, and electric power. That will cause a huge boom in the natural resource industry.

There are more than $38 billion of federal energy projects waiting for approval or better regulatory conditions. The most famous one is TransCanada's (TRP) Keystone XL Pipeline Project. These will be easy to get started on with a stroke of a pen. That's why we call this the Keystone Plan.

Recently, the Wall Street Journal reported that over a dozen energy projects have been scrapped since 2012... Some were halted by regulators, others were pulled by developers due to unfavorable conditions. There are also billions of dollars' worth of projects tied up in red tape.

With his Keystone Plan, Trump promised to slash back regulations. He would free up huge investments in energy infrastructure. Trump's first economic promise was to rebuild highways, bridges, tunnels, airports, schools, and hospitals.

We are in position to benefit from many of his plans. We're invested in areas like pipelines, coal miners, copper miners, and oil and gas companies. They'll benefit from this massive investment in U.S. infrastructure. We're also putting together our list of stocks to buy down the road.

There are hundreds of companies in the natural resources sector that will benefit from this program. Not all of them will benefit in the same way... For example, given its size, we can't expect ExxonMobil (XOM) to double with a new infrastructure bill.

However, I do expect companies like Bob's Barricades to double or triple from this stimulus. The trick is finding the right public companies in the right niches.

I'll tell you now, however, we're not buying anything new this month. The markets are incredibly volatile, as we'll show you. Some stocks have ripped higher since the election... much higher than they should have... while others have languished.

In fact, much of the low-hanging fruit is already growing out of reach. For example, in his vision plan, Trump lays out a simple statement:

Put American steel made by American workers into the backbone of America's infrastructure.

That's an example of low-hanging investment fruit. After reading that, you might think that our first investment should be a steel company... like U.S. Steel (X). But not so fast – look at this chart of U.S. Steel:

The stock is up about 380% year to date. That's not just because of Trump's plans – U.S. Steel has streamlined its operations, closed divisions, and laid off hundreds of employees in August 2016.

But you can see a clear jump so far in November. U.S. Steel was an obvious investment for most U.S. investors. They saw their opportunity and they've jumped on it in droves. U.S. Steel has gotten far too expensive for our tastes, and any upside from here would be small.

As we'll talk about later, many mining companies are feeling the "Trump effect," too. But they've been heading the opposite direction... They've been tanking for the past month.

Again, as we'll talk about later, we're not too worried.

This should all shake out in the next couple of months. And then we'll be in position to make 2017-2020 our best performance period ever.

We believe we'll have the chance to make a ton of money in a variety of areas, not just the major steelmakers or engineering firms... It'll be companies like Bob's Barricades, too. Companies that every improvement project will need to employ. These ancillary companies are going to be our gold mines.

There are literally hundreds of stocks that will benefit (some massively) from this infrastructure investment. Just take a look...

What we're going to do is dig deeper into these sectors. While the rest of the country opts for the low-hanging fruit, we're going to make the real profits.

Now, in any investment that depends on politicians doing something, we have to ask ourselves... will this plan really go through? It's impossible to say, but we like our chances. Canada's Prime Minister Justin Trudeau certainly likes what he sees. The liberal leader is pragmatic about energy. His country needs to get its oil to ports. That means pipelines. But like in the U.S., building pipelines in Canada inflames some of the population.

Like Trump, Trudeau backs the TransCanada's Keystone XL pipeline, which would expand Canada's export capacity to the port of Houston, Texas. That pipeline, blocked by the Obama administration, will likely get approval from Trump.

For now, Trump's infrastructure spending promises are still just promises. Obama made promises about infrastructure upgrades, too. But we believe that this plan is more aggressive and more widely supported.

We're also aware that little else has changed on Capitol Hill... Many of the things that held Obama back on spending and legislation will still be around... I don't believe that we're going to see these plans go through without a fight.

There is already pushback from some conservatives in Congress over cost. However, Trump's victory as a Republican candidate with a Republican-controlled Congress should smooth some things out.

However, neither Republican Senator John Thune nor Republican Congressman Bill Shuster embraced the project... and they are vital to getting it done. Thune is the chairman of the Senate Committee on Commerce, Science, and Transportation. Shuster chairs the House Transportation and Infrastructure Committee.

That's the big risk for us. This is still the same "do nothing" Congress we've seen for over 16 years now. Investing in political promises is a bad plan. That's why we aren't recommending anything new this month.

However, I think some version of this plan will go through. If it does, we're going to make a lot of money. So much money. It'll be huge... the best money we've ever made.

We are optimistic for the coming year.

Why We Need the Keystone Plan Today

Infrastructure is something we'll spend a lot of time on this year. I won't go too much into the weeds right now. But understand... there are a lot of problems.

We use "infrastructure" as a catch-all to describe things like roads, rail, pipes, wires, and ports. We use them every day and rarely notice... And yet they're critical to our lives. We usually notice them when they break, rather than when they are working well.

Unfortunately, much of the U.S. infrastructure is over 50 years old. And it is breaking down. The government gets periodic reviews... but rarely acts.

The first national infrastructure "Report Card" was a report sent to the president and Congress in 1988 by the National Council on Public Works Improvement (NCPWI). It covered eight categories: highways, mass transit, aviation, water resources, water supply, wastewater, solid waste, and hazardous waste. The average grade was a "C," and the NCPWI recommended a $200 billion investment over five years to improve its grade.

In 1998, the American Society of Civil Engineers (ASCE) took over the Report Card. It changed some of the categories. For example, highways became bridges and roads. Water resources became dams. Water supply became drinking water. They also added schools. The average grade fell to a "D."

The table below shows the results of the latest (2013) ASCE Report Card:

This is shameful. The only passing grades are on bridges, railroads, ports, and landfills. Fundamentals like regular roads, hazardous waste, drinking water, mass transit, schools, and levees all have failing grades. This is a massive "to-do list" for America.

The problem is our core infrastructure is aging. The government hasn't spent the money to keep it working. It's only getting worse.

In 2013 (the most recent year of the study), the ASCE estimated we need to spend $3.6 trillion by 2020 to update our infrastructure to meet current standards. And that's just to fix the problems we have now... We'd have to spend even more to maintain them in the future.

It's simple math – according to the National Association of Manufacturers (NAM). NAM says the country will need at least a trillion dollars just to improve transportation. Without that, they estimate we'll lose up to 2 million jobs by 2025.

If Trump comes in and gets investment into some of these areas, it still won't be a quick fix. It will carry over to the next administration. It's going to take years of political will to invest the dollars here. But it will spur the economy and improve all our lives.

Fulfilling even a portion of that mandate will make resource investors a lot of money. We'll spend a lot of time on infrastructure as it gets rolling. This will be a cornerstone of the Stansberry Research Resource Report for many years... if Trump can get this Congress on board.

As I said, there are literally hundreds of companies that could benefit from the Keystone Plan.

And again, we're not recommending anything today.

But we do have our eyes on a few companies that are poised to soar... Below are some companies we think may do that in the future.

This isn't a wish list or a buying guide. This is more of a sneak peek to give you an idea of where we're looking:

TransCanada (TRP) – The owner of the Keystone XL pipeline. TransCanada is a $38 billion North American energy-infrastructure company. Pipelines, particularly those stuck in regulatory limbo (like the Keystone), should benefit from a Trump administration.

Cemex (CX) – The largest cement producer in North America. Cemex is a global leader in the building-materials industry. It has 13 cement plants, 46 distribution terminals, 74 quarries, and more than 350 ready-mix concrete plants. Much of the Keystone Plan will benefit materials like concrete and asphalt... so Cemex should profit.

Watts Water Technologies (WTS) – A major water-service company. Watts makes products that control the efficiency, safety, and quality of water. It generates two-thirds of its sales in North America. The Keystone Plan will target U.S. water supply and transport. We see the water sector as a great place to find value.

Gibraltar Industries (ROCK) – A major building-products supplier. It leads the U.S. market in products like bearings, expansion joints, and sealings for bridges and elevated-highway construction. Material suppliers always do well in booms like this. During the gold rushes of the 1800s, if you sold picks and shovels, you got rich. That's a sector we definitely want to own.

We aren't ready to buy these stocks just yet. We want to get through the inauguration and into the Trump presidency before we commit our capital here. But these are examples of the kinds of companies we're looking at for the future.

Good investing,

Matt Badiali

Editor's note: As part of our special holiday series, we're offering Digest readers a significant discount off the normal cost of some of our most popular research.

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