Get Your Piece of Uncle Sam’s $42 Billion Broadband Build-out
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| By Sean Brodrick |
Uncle Sam is about to start throwing bags of cash at problems again, so it’s time to grab a bucket.
I’m talking about broadband. You may have heard that on Monday, President Biden announced a $42.5 billion plan to expand Americans’ access to broadband. President Biden says he wants to “connect every person in America to reliable high-speed internet by 2030.”
This is the Broadband Equity Access and Deployment Program. It’s meant to “fill in the gaps” on the U.S. broadband map, extending fast internet connections to rural and thinly populated areas.
Every state will get something. Allotments range from $100.7 million for Washington, D.C., to $3.3 billion for Texas. If you want to see how much your state is getting, click here.
Roughly 7% of the United States still does not have broadband service that meets the government’s minimum standards (at least 25 megabits per second for downloads and 3 megabits per second for uploads). That 7% includes 8.5 million homes and businesses.
How much each state gets depends a lot on how much of their population is underserved by existing broadband.
That happens a lot in rural areas, where houses are too far apart for the corporations that build and run America’s broadband to connect them, because the investments are expensive and these rural regions do not offer a lot of subscribers.
So, this is good news for country folks. Some taxpayers will grumble, because $42.5 billion spread over 8.5 million means that you could mail each of those poorly connected folks a check for $4,941.
But love it or hate it, the money is going to be spent — it’s part of the $1 trillion Infrastructure Bill passed in 2021. So, as investors, we have to figure out if we can profit from it. Potentially so.
The four biggest broadband providers in the country are Verizon (VZ), Comcast (CMCSA), Charter Communications (CHTR) and AT&T (T). So, you could buy individual stocks. Or you could buy an exchange traded fund with broadband exposure.
My recommendation would be the SPDR S&P Telecom ETF (XTL). It tracks the must-have S&P Telecom Select Industry Index, and includes companies from telecommunications subindustries including communications equipment, integrated telecommunication services, alternative carriers and wireless telecommunication services. Some of those groups are leveraged to this move.
And the chart of the XTL is starting to look interesting:
Click here to see full-sized image.
You can see that XTL was in a downtrend all year, but it finally pushed up through that downtrend last month. And it just retested its new uptrend and bounced. There’s always risk in buying anything, but that looks like a fairly low-risk entry. XTL has an expense ratio of 0.35%, which is pretty cheap.
The government is spreading money around, in a bid to give poor and rural Americans broadband like the rest of us.
You can bet that big corporations will be ready to scoop up some of that cash. You might as well grab a bucket and join the profit party.
That’s all for today. I’ll be back with more soon.
All the best,
Sean
P.S. If you’d like to attend an even bigger profit party, I invite you to join my service, Supercycle Investor, where my picks ride big, long-term trends while grabbing short-term, speculative profits. In fact, members are currently sitting on an open gain of 91%.
