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Two Small-Cap Stocks in the Sweet Spot for an Infrastructure Deal

Real Money contributor Bret Jensen talks about some lesser-known stocks that could benefit from the pending infrastructure deal.

The strength of the current economy can be seen in the growth of steel, construction and railroad firms, especially in light of the Biden Administrations’ pending infrastructure deal, Bret Jensen writes in a recent Real Money column. But what about in the far corners of the market where few ever look?

In his column, 2 Off-the-Radar Stock Plays on the Return to Normalcy, Jensen looks at two small-cap stocks that are rarely in the limelight but which he thinks should also benefit from the strength of the post-pandemic economy. Jensen starts with prefab interior provider DIRTT Environmental Solutions  (DRTT) - Get DIRTT Environmental Solutions Ltd. Report. DIRTT has been on a generally upward swing since March, and has surged steadily upward in June. And shares are up 33.65% in the past three months.

“The company is somewhat a unique play in this space," Jensen wrote. "The customer will generally hire an architect or designer to conceptualize an interior space. The customer then visits one of the more than 75 North American DIRTT Experience Centers and downloads the design into their platform and receives a quote... Once a final design has been agreed upon, the specs are sent to one of DIRTT's manufacturing facilities where it is constructed in three weeks or less.... I think the company offers a superior solution/process in this space and obviously the sector should benefit greatly as folks return to their offices,” Jensen wrote.

Jensen wrote more extensively about the unique approach of DIRTT in December 2020 and its potential in 2021. Real Money: Look What Insiders Are Buying Now

Get more of Jenson's investment ideas and analysis on Real Money. In his latest column, he writes about why yields continue their perplexing fall, and says the action in Treasuries is just one more reason to be cautious about equities at current trading levels.

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Jensen sees the return to work in the office as key.

“Workers are slowly returning to the office. Employers in Manhattan now project 62% of their workforce will be back in the office by September. While still far below pre-pandemic levels, it is an improvement from the 47% forecast made in March of this year,” Jensen wrote.

Jensen then looks at another small cap, Universal Logistics Holdings  (ULH) - Get Universal Logistics Holdings, Inc. Report. “As the name implies, the company provides various transportation and logistics solutions throughout the United States. As freight volume continues to pick up across the nation, the company should benefit,” Jensen wrote.

Universal Logistics has been on a mostly upward roller coaster since January, with a dip in mid-June. It has yet to approach 2018 highs. 

“What got Universal on my radar was two-fold. First, it was a logical name that will be buoyed as the economy continues to reopen. Second, the stock is downright cheap trading at seven times this year's projected earnings. The company also smashed expectations when it delivered record first-quarter numbers in late April. I expect that trend to continue in the quarters ahead,” Jensen wrote.