With President-elect Barack Obama pledging to rebuild the economy from the inside out, infrastructure companies stand to reap a substantial bonanza.
Obama has promised a program not seen in half a century to shore up the national highway system, erect public buildings and reconstruct the nation from top to bottom.
A $136 billion infrastructure component is the keystone of a potentially $1 trillion Obama economic stimulus plan that moves beyond providing one-time rebate checks to taxpayers and escalates into generating employment and business opportunities for struggling companies.
Though he does not take office for more than a month, Obama's intentions already have had an impact.
Stocks surged Monday on the stimulus hopes, with big winners ranging from Dow component and construction equipment leader Caterpillar (NYSE: CAT) to a slate of Brazilian steel makers. Engineering firms also were big winners, while oil and mining shares helped boost foreign markets even before the Wall Street open.
"I applaud the president-elect. This is the right category of stimulus that the country needs," says Tom Busby, CEO at Day Trading Institute in Mobile, Ala. "I see benefits from this not only domestically but globally, so I think this is the right song to play."
A group of industries as diverse as builders to internet companies could benefit from the focus on rebuilding the national infrastructure, the focus of which will be both on construction and communication.
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But while there's plenty of enthusiasm now, market experts are warning a cautious approach in which investors should nibble their way in and wait to see if Obama's plans will be realized under the economic constraints his administration will face.
"One of the things you have to consider is when fast money charts start chasing a stock or a group, the stocks go too far too fast," says Richard Sparks, senior analyst at Schaeffer's Investment Research in Cincinnati. "It's only with a little caution that I would say wade in. The market has been extremely volatile."
Where to Play
While Caterpillar has been one of the names most often mentioned to gain from the infrastructure focus, Sparks likes some of the smaller companies in the field.
Monday's surge brought some companies to near 52-week highs, and Sparks backs Granite Construction (NYSE: gva) among them. The Watsonville, Calif.-based civil contracting business has doubled in share price over the past six weeks and is poised for greater gains.
Other stocks Sparks is watching include Sterling Construction (NASDAQ: STRL), which also has doubled since Nov. 21, and Aecom Technology (NYSE: ACM), which provides technical and managerial services to companies around the world and was trading in the $15 range as recently as late October.
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In line with the technology theme, Busby believes Microsoft (NASDAQ: MSFT) could be in an advantageous position not only because of the infrastructure play but also because of the close relationship between Obama and Microsoft leader Bill Gates.
And Busby also is playing Northrop Grumman (NYSE: NOC), which is barely off its 52-week low but in a position, he says, to rebound because of the increased demand for engineering services.
But Busby also is an advocate of careful investing in the group.
He advises taking an initial step on Jan. 2 as the new year begins, then waiting 15 days to see if the position improves. At that point he would invest more, then wait until the end of the month to calibrate gains again. If the group is higher Busby advocates making a stronger move, but if the group falls he advises taking some off the table.
"Remember this economy is a big Mama, and you don't get a big Mama excited until you see big results," Busby says. "You want to go small until you've seen actual stocks tell you you've made good decisions before you commit."
A slew of other companies were rolling through Monday's gains on the infrastructure play.
Brazilian steel makers Siderurgica Nacional (NYSE: SID) and Gerdau (NYSE: GGB) both rallied. In engineering, some of the big movers were Jacob's Engineering (NYSE: JEC), Shaw Group (NYSE: SGR) and Fluor (NYSE: FLR).
Busby also thinks green companies are likely to do well next year, but he advocates a stock-picker's approach rather than betting on entire sectors.
"I think you've got to be nimble. It doesn't happen overnight," he says. "I'd be very careful." For more stories from CNBC, go to cnbc.com.