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This Disaster Stock Could Make You 25% Richer by Next Year

Just one year ago this week, the East Coast was savaged by Superstorm Sandy. The flooding, property destruction and loss of life that blew in with the storm was horrendous, as was the massive power outage that knocked out electricity to more than 9 million people.

The failure of the power grid to withstand the storm's force was a wakeup call for many Americans, who realized that if they wanted to ensure they have electrical power for their homes and businesses, they may have to take matters into their own hands.

This self-reliance awakening has been a huge boom for Generac Holdings (GNRC). The company is the largest maker of portable and standby generators in the country, and due in large part to Superstorm Sandy, the past year has been spectacular for GNRC.

In its most-recent quarterly earnings report, released last week, Generac reported a 36% year-over-year rise in earnings per share (EPS) to $1.06, well above consensus estimates for $0.83 per share. Revenue surged 21% from a year ago to $363 million. That number also easily topped Wall Street's expectations and, according to Generac, the good times are by no means over yet.

Along with the strong earnings beat, the company raised its forecast for the full year, saying it expects sales growth to come in the mid-20% range from a previous forecast of the low-20% range.

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Not surprisingly, traders loved the news. The stock spiked 13.4% in one day following the announcement. GNRC shares now trade just below their all-time highs, and well above both the 50-day and 200-day moving averages.

The post-earnings gain was indeed impressive, as is the fact that the stock has doubled in the past year since Sandy hit.

GNRC Stock Chart

Now, however, traders are wondering if there is any more juice left in GNRC. Given the big run higher in the stock already, should you be a buyer here?

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I think the short answer to that is an emphatic "yes."

This week's numerous Sandy retrospectives are reminding us that the loss of our homes and the things we take for granted, such as electricity, are just one natural disaster away. This sobering thought might not be pleasant, but it is something any responsible homeowner and business owner needs to guard against.

In the interest of full disclosure, I have actually taken my own advice here by purchasing a Generac system for my ranch in Southern California. We don't get a lot of inclement weather here, but we are susceptible to earthquakes that can take out the power grid for extended periods. We also have heat waves that can cause blackouts during the high-demand summer months. A Generac system makes these potentially dangerous circumstances of little concern, and the piece of mind I now enjoy on this front is well worth the cost of the product.

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The bottom line here is that Superstorm Sandy woke many of us up to the fact that if we want to help guard against Mother Nature's wrath, we need to take proactive steps, and one of those steps is to get our own power generator. This realization has created a boom for Generac's bottom line, as well as GNRC shares, and I fully expect that boom to continue well into next year.

Recommended Trade Setup:

-- Buy GNRC at the market price
-- Set stop-loss at $44.71, approximately 10% below recent prices
-- Set initial price target at $62.10 for a potential 25% gain in six months

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