There’s a battle raging for the nation’s soul, with half our citizens staunchly defending a basic level of government support for a range of social and public services, while the other half sees government spending as mostly wasteful. Yet both sides agree that our nation’s infrastructure performs a vital role in the smooth functioning of our economy, and it’s only a matter of time before this critical part of our economy merits greater attention from policymakers.

And as I noted in the first part of this analysis of our nation’s infrastructure, we’ve got a considerable amount of catching up to do.

For investors, the question will focus on which companies stand to benefit from the eventual, inevitable upturn in infrastructure spending. Here are five stocks to watch…

1. Power

The recent devastation of Hurricane Sandy exposed the vulnerability of our nation’s electricity delivery system. Many people were without power for days on end, and there is a growing consensus that it will happen repeatedly as future storms wreak havoc. The problem lies in the use of power lines, which can easily topple in a strong windstorm. In Europe, many countries have solved the problem by burying power lines below ground. It’s costly to dig trenches and bury them, but the long-term savings really start to add up when you consider the cost of serially-repaired power lines.  Quanta Services (NYSE: PWR), which is one of the nation’s leading providers of utility installation services, is likely to be a clear beneficiary of the trend toward buried power lines. Two-thirds of the company’s sales come from electric utility contracts, and the remainder comes from natural gas pipeline and other power transmission systems. Beyond the impact of major storms on the nation’s power rigid, there’s an age issue. Rising power demands are starting to strain the national grid, so power companies have already begun to plan for long-term network upgrades and expansions. So this isn’t just a play on Uncle Sam‘s spending, but the private sector as well.

2. Roads

Consider Sterling Construction (Nasdaq: STRL) to be the deep value play among infrastructure investments. A recent multi-year under-investment phase has dampened results for this road builder, pushing shares down from $22 five years ago to a recent $9. The value angle: Shares now trade below tangible book value, even as book value is set to rise in 2013 as earnings per share (EPS) rebound to 30 cents. By mid-decade, rising infrastructure spending could push EPS north of $1 a share, which is what the company earned in 2005 through 2010.

3. Ports

Our nation’s ports and key rivers are the lifeline of trade, and recent droughts, the advent of ever-larger “Panama class” ships and other factors are leading to a steady investment that should extend for a number of years. Analysts at D.A. Davidson “expect substantial growth in 2013” for Great Lakes Dredge & Dock Corp. (Nasdaq: GLDD), noting that projects backlog surged 38% in the quarter ended September to $506 million. They also noted that “with additional award opportunities over the near-term including beach restoration work and port deepening projects in the U.S., bookings should continue to increase.”

4. Bridges

This company is a jack-of-all-trades, from building highways and mass-transit systems, to bridges and wastewater treatment plants. Tutor Perini (NYSE: TPC) has plenty to keep it busy, with a current $5.6 billion in orders in backlog. On an earnings basis, this is a very inexpensive stock, trading at around seven times trailing profits, and less than six times projected 2013 EPS of around $2.40. As an added kicker, shares trade at just 60% of the stated $23 book value.

5. Water

This exchange-traded fund (ETF) is the savviest way to play our nation’s water woes. The First Trust ISE Water Index Fund (NYSE: FIW) owns a range of water treatment or conservation companies such as desalination firm Energy Recovery (Nasdaq: ERII), irrigation equipment provider Lindsay Corp. (NYSE: LNN), and water-filtration equipment firm Mueller Water (NYSE: MWA). The fund is up roughly 20% this year, and gains should continue as cities upgrade their aging water systems and farmers invest in methods to use scarce water resources more efficiently.

Risks to Consider: The government has under-invested in infrastructure in recent years, and that could continue to be the case in 2013 if Washington can’t develop a permanent fix for its budget woes.

Action to Take –> These infrastructure stocks have been out of vogue in recent years thanks to government cutbacks. But as the cycle of under-investment is extended, the stage is increasingly set for an eventual sharp snapback in spending as long-neglected aspects of the infrastructure finally get their due. Wise investors should have these stocks on their watch list as we get into the new year. 

P.S. — You won’t want to miss our special report, Top 10 Stocks for 2013. In this special presentation, we’ll tell you about our just-released picks for 2013 — including several names and ticker symbols — so that you can start profiting from these ideas today. Go here to learn more.