Granite Construction Looks Rock Solid

This market is fairly devoid of trading themes at the moment, but the domestic infrastructure theme is starting to gain traction, and we can see another leg to the upside developing in the group. The new Democratic administration is gearing up to dole out close to a trillion dollars in domestic stimulus packages as soon as possible, with a focus on domestic infrastructure projects.

The initial reaction to this plan has pulled the heavy construction and materials sector up and out of the basement, and helped to create an interesting technical reversal in the group. We have seen a pullback and cooling in the sector, and several names in the group are at interesting entry points on the long side. One of these names is Granite Construction (GVA - commentary - Cramer's Take).

Granite Construction is one of the largest civil construction companies in the country. Granite concentrates on highway, bridge and other transportation projects. The company is well-positioned to benefit from a large-scale government infrastructure build-out.

The one negative in the current environment for Granite is the fact that the company does have a large concentration of its business in California, which is currently in a budget crisis. It remains to be seen how many projects are lost by state cutbacks vs. what is gained in federal spending.

The fact that Granite's business is primarily domestic vs. the global scope of many of its competitors should position the company to get the biggest boost out of the new administration's plans.

What really interests us about this stock is the technical set-up.

Granite Construction Daily vs. S&P 500

Granite has surged off of the lows on news of the Democratic plans. The stock has outperformed the market and the construction sector since October and looks well-positioned to move higher.

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At the time of publication, John Hughes and Scott Maragioglio had no positions in the stocks mentioned.

Hughes and Maragioglio co-founded Epiphany Equity Research, which has developed and utilizes proprietary tools to identify and track liquidity changes in the market indices and sectors. Hughes advises numerous asset managers, hedge funds and institutions managing in excess of $30 billion. Maragioglio is a member of the market technicians association (MTA) as well as The American Association of Professional Technical Analysts (AAPTA) and holds a Chartered Market Technician (CMT) designation. Maragioglio has also served on the board of directors of the AAPTA.