Steve Eisman, famous for his role in ‘The Big Short’ and his early predictions about the 2007-2008 U.S. housing crisis, has shifted his investment strategy and is advocating a focus on stocks that stand to benefit from the U.S. government’s expansive spending initiatives. In contrast to some who anticipate a housing market crisis, Eisman sees no impending housing crisis on the horizon.
Eisman’s current investment strategy, which he terms “revenge of the old school,” involves investing in bonds for the first time in his career and acquiring stocks from traditional, well-established industries. He believes that the U.S. government’s substantial spending plans are set to create significant investment opportunities.
According to Eisman, this marks the first industrial policy the U.S. has seen in several decades, and the impact is yet to be fully realized. This spending has not yet affected revenues, making it a prime time for investors to position themselves.
Eisman’s stock preferences include construction firms, utilities, industrials, and materials, favoring these traditional sectors over innovative but riskier technology companies.
Here, we explore two stocks that align with Eisman’s approach, both of which have received a ‘Strong Buy’ rating from analysts.
1. Vulcan Materials Company (VMC)
Vulcan Materials Company is a prominent U.S. producer of construction materials, dating back to 1909. It is a key supplier of construction aggregates, including crushed stone, sand, and gravel, essential for infrastructure development such as highways, bridges, and construction projects. In the second quarter, Vulcan Materials exhibited impressive financial performance, with an 8.2% year-over-year increase in revenue to $2.11 billion and adjusted EBITDA up 32.2% to $595.3 million.
Analyst Stanley Elliot from Stifel maintains an optimistic outlook on Vulcan Materials, citing a robust aggregate business, fiscal stimulus, and improving residential and non-residential markets as factors driving healthy volumes. Elliot rates VMC as a Buy with a $260 price target, implying a 29% potential increase over the next year.
2. Construction Partners (ROAD)
Construction Partners, based in Alabama, is a significant player in the construction and infrastructure sector, focusing on civil infrastructure projects like roads, highways, and bridges. Their revenues surged from $785.7 million in fiscal 2020 to $1.30 billion in 2022, driven by acquisitions, contract work, and sales of products like hot mix asphalt and aggregates.
Analyst Patrick Tyler Brown from Raymond James sees CPI as a beneficiary of significant infrastructure investments due to federal programs like IIJA and increased funding for state departments of transportation. Brown believes that CPI is well-positioned for near-term and long-term growth, given the favorable funding environment.
Both of these stocks have received a ‘Strong Buy’ consensus from analysts, with promising growth prospects.
Overall, Steve Eisman’s “revenge of the old school” approach, which emphasizes investments in traditional industries that benefit from government spending, presents opportunities for investors looking to diversify their portfolios in anticipation of continued economic expansion.
