These 3 Stocks Represent an Unseen Opportunity

Last week, we discussed a major opportunity for investors: the urgent need to modernize America’s aging electrical grid and increase the amount of electricity generated. The scale of investment required for an electrical grid that can handle the increased demand from new technologies is staggering. 

To address this bottleneck, it’s estimated that over $1.4 trillion will be spent over the next 5 years. The immediate beneficiaries of this capex wave have already seen their stock prices soar. In fact, many of these stocks have already become overvalued by traditional valuation metrics. This means that while the long-term story remains compelling, the risk/reward equation is no longer in investors’ favor.  

This brings us to a crucial consideration for investors: how to gain exposure to this powerful, secular trend while mitigating the obvious risks associated with high valuations and a potentially overextended market. This is where the Zen Ratings come into play, helping us identify opportunities that combine strong fundamentals with attractive valuations.

Already, we’ve utilized the Zen Ratings to pinpoint some of the early winners that have been covered in previous articles. Today, I want to dig deeper into the theme to uncover another winning idea. 

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Integral Intermediaries

This is why today’s newsletter is about the engineering sector. Engineering stocks have been out-of-favor for decades. This underperformance has resulted in a sector that is trading at reasonable valuations with the looming wave of capex, serving as a major potential catalyst for earnings growth and multiple expansion.

Engineering and construction firms are integral intermediaries in the development of infrastructure. Typically, these companies operate with lower than average profit margins. It’s very likely that the wave of capex lifts earnings, but these stocks have considerably more upside if profit margins rise due to increased pricing power given the urgency of the task.

As the nation gears up for an unprecedented overhaul of its electrical grid and the build-out of critical infrastructure for AI and EVs, the engineering and construction sector is at the nexus of this transformation. 

Let's delve into three stocks that embody this powerful investment theme: EMCOR Group (NYSE: EME), Stantec (NYSE: STN), and MasTec (NYSE: MTZ).

1. EMCOR Group (EME)

EMCOR Group is a diversified mechanical and electrical construction services company, making it a direct beneficiary of the infrastructure spending, specifically related to data centers. The company offers a wide array of services ranging from commercial and industrial electrical construction to complex mechanical systems for data centers and renewable energy projects.

The Zen Ratings give EME an overall grade of Buy (B), underscoring its integral role in the grid’s modernization. Drilling down, EMCOR earns strong Component Grades in Sentiment (B), Financials (B), and especially Momentum (B). 

This combination reflects not only positive analyst and investor sentiment but a strong financial position and consistent outperformance across various timeframes. A major factor is the company’s margins nearly quadrupling over the last 5 years due to the surge in spending on data centers.

In fact, EMCOR has been a star performer within the Zen Investor service, delivering nearly 90% returns for subscribers. Each stock in the Zen Investor portfolio is hand-picked by 40+ year market veteran Steve Reitmeister, who uses a rigorous 4-step screening process to locate the highest-potential stocks. Check out other stocks in the Zen Investor portfolio

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2. Stantec (STN)

Stantec is a global leader in sustainable design and engineering, offering consulting services in infrastructure, water, environmental, buildings, and energy & resources. The company derives significant revenue from designing and consulting on smart grid projects, integrated renewable energy systems, and energy infrastructure, 

One indication of the company’s bullish momentum is its streak of beating analysts’ earnings estimates for 5 consecutive quarters. So far in 2025, analysts have hiked full-year and 2026 earnings estimates by more than 20% due to stronger-than-expected guidance. 

STN boasts an impressive Strong Buy (A) overall rating from the Zen Ratings, putting it in the top 5% of all stocks. A-rated stocks have an average annual performance of 32.5% which beats the S&P 500’s average annual gain of 10.8%. 

STN also has very strong Component Grades. Out of our universe of more than 4,500 stocks, it ranks in the top 3% for Momentum. This is consistent with its stock price outperforming on multiple timeframes in order to positive improvements in terms of earnings growth and margin expansion. 

Over the next 3 years, analysts are forecasting 96% earnings growth. This aggressive growth, coupled with its strong market positioning and reputation for sustainable solutions, makes Stantec a standout in the engineering sector. 

3. MasTec (MTZ)

MasTec is a leading infrastructure construction company with significant exposure to the communications, energy, and utility sectors. MasTec builds critical electrical infrastructure, such as transmission lines, substations, and smart grid systems and counts major utilities among its customers.

The company will report earnings next week, and analysts are looking for 47% earnings growth and a 15% increase in revenue. Coming into the quarter, the company has a streak of exceeding estimates for 7 straight quarters. 

In terms of the Zen Ratings, MTZ has a Buy (B) rating. B-rated stocks have an average annual performance of 19.9% which handily beats the S&P 500’s average 10.5% gain. 

In terms of component grades, MTZ is in the top 1% of all stocks in terms of Growth. A major factor is that analysts are projecting earnings to increase by more than 200% over the next 3 years. The analyst community is also overwhelmingly positive on MTZ, with 13 out of 14 analysts issuing a Strong Buy rating on the stock. 

Conclusion

Engineering companies are a way to invest in the picks and shovels of the electrification trade. 

These stocks have significant upside given that earnings are likely to continue rising, while margins are also set to expand. Additionally, lower valuations mean more stable returns while still providing exposure to the secular trend. 

What to Do Next?

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