Stocks that tend to do well during hurricane season.
Hurricane season can have far-reaching impacts for those directly affected by storms. The effects can carry over into the stock market, with certain companies benefiting from a hurricane. "Some stocks perform well during storm season if a favorable hurricane impact on profits exceeds investor expectations," says Mike Bailey, director of research at FBB Capital Partners in Bethesda, Maryland. In 2017, the S&P 500 increased following the landfalls of Hurricanes Irma and Harvey, which pushed up prices for building, trucking and home improvements stocks. "An above-average storm could drive home improvement demand above Wall Street estimates, boosting investor sentiment and the stock price." These seven stocks can provide a shelter from the storm when hurricane season is in full swing.
Lowe's (ticker: LOW)
Home improvement stores may be a natural fit when choosing hurricane stocks. They can experience a sales uptick ahead of a storm, as consumers shore up their homes against potential damage. Once the storm has passed by, they can see another sales surge as homeowners make repairs and handle the cleanup. Lowe's is currently a "buy" recommendation, with annual revenue increasing steadily over the last five years. This year's growth estimate is 9.2%, although the company's next earnings report is expected to show a slight decline in earnings per share. Bailey says investors interested in buying LOW should consider future storms relative to the prior year to keep potential gains in perspective.
Home Depot (HD)
Home Depot is another home improvement giant that could prove beneficial to a portfolio during hurricane season and potentially year-round. "The best investments are those you would purchase any time," says Scott Braddock, CEO of Scott Braddock Financial in Raleigh, North Carolina. Home Depot fits that description, with both annual revenue and earnings rising year over year since 2016. The current dividend yield is 2.5%. In terms of risk, investors should be mindful of the unpredictability of storms. "The major downside of buying stocks for hurricane season is that the season may not be as active as forecasted, and the upswing you had hoped to get does not materialize," Braddock says.
Generac Holdings (GNRC)
When severe weather has the potential to disrupt utility services, companies like GNRC can reap a benefit. "GNRC is the leading producer of generators," says Peter Ricchiuti, a senior professor of practice at Tulane University's Freeman School of Business. "After a big storm power goes out and homeowners vow to own one before the next one comes." Year over year, the stock's price has climbed from $55.76 per share to $73.25 per share. GNRC has a 5.5% growth estimate projected for 2020. While Wall Street is predicting a slight drop in earnings per share for the second quarter of 2019, the stock currently has a "hold" recommendation.
National Oilwell Varco (NOV)
When hurricanes hit the Gulf Coast, offshore oil drilling can take a hit. National Oilwell Varco is a leading equipment supplier for the oil and gas industry. Ricchiuti says when a big storm is imminent, that can trigger a rise in these stocks. "Down here in New Orleans, some investors here view these kinds of investments as a kind of hedge against the misery of a hurricane," he says. NOV's second-quarter earnings report has it solidly in the red, with a nearly $5.4 billion loss posted. On a more positive note, revenue was up 1.2% year over year. With a high growth estimate, NOV earns a solid "hold" recommendation at the moment.
Copart specializes in processing and selling salvaged vehicles and vehicle parts, which could make it a solid performer after a damaging storm. Following Hurricane Harvey, Copart's share price held steady, although the company did see a sharp price decline in August 2018 after the company released the final tally for storm-related losses. But overall this stock is trending upward. CPRT's projected earnings per share benchmark for the second quarter and annual earnings have nearly doubled since 2015. Right now, it's considered a "buy" with a per-share price that puts it very near fair market value. There's a chance that CPRT could shift to a "hold" recommendation but for now, it remains a strong growth stock both in the auto space and across the stock market overall.
Marine Products Corp. (MPX)
Marine Products is a boat manufacturer, which could bode well for investors seeking hurricane season buys. So many pleasure boats are destroyed and need to be replaced following a storm, Ricchiuti says. MPX has currently been deemed an undervalued stock at around $16 per share, recently shifting from a "buy" to a "hold" rating. The stock has a modest but stable dividend yield of 3.1%, potentially making it an attractive choice as a short- to mid-term investment. The stock's price has established a consistent pattern over the last decade, climbing consistently during peak hurricane season months before dipping again during the winter and spring.
Class B shares of Berkshire Hathaway don't come cheap -- at around $200 per share -- but they're more affordable than Class A shares, which lie well out of reach for the everyday investor. Bailey says it's a good buy for investors who want exposure to the property and casualty industry and anticipate a lighter hurricane season. "If storm damage is mild, insurers keep the premiums and stocks often go up," he says. The downside of that is that if storms are too mild, demand and pricing may fall. Berkshire Hathaway is a mixed bag as far as ratings go, with a nearly even split between "buy" and "hold" recommendations.
Consider these stocks during hurricane season.
-- Lowe's (LOW)
-- Home Depot (HD)
-- Generac Holdings (GNRC)
-- National Oilwell Varco (NOV)
-- Copart (CPRT)
-- Marine Products Corp. (MPX)
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