Hurricane Sandy is headed up the U.S. east coast, apparently with the potential to batter the New York coast next week in what some observers are calling a Frankenstorm. Let's hope people aren't taking any chances with the bad weather. But investors? In some cases, they seem keen to expose themselves to Mother Nature's fury, given the moves by a couple of hurricane-sensitive stocks.
Now, the hurricane investment play might not be a common one. And some people naturally object to the idea of making a profit when that profit relies upon a terrible catastrophe. But anyone who has studied the impact of hurricanes knows that their destructive force can move stocks.
Bespoke Investment Group pointed out on Thursday that stocks associated with storm preparation and fallout can really move. An example of short-term thinking? For sure, but not everyone thinks like a long-term investor all the time.
Generac Holdings Inc., which designs and makes generators – handy when the power goes out for an extended period – was up 2.3 per cent in afternoon trading on Friday. The shares have risen for four straight days, during which time they have scored overall gains of 10 per cent. That looks even better when you consider that the S&P 500 has fallen nearly 2 per over this same period.
Briggs & Stratton Corp., which makes power washers in addition to portable generators, was up 2.4 per cent in afternoon trading.
Investors seem to be taking the opposite approach toward Public Service Electric and Gas Co., the New Jersey's electric and gas utility. The shares fell 0.8 per cent on Friday, no doubt fuelled by the utility's concerns.
"In anticipation of Hurricane Sandy, PSE&G has requested more than 1,300 linemen and 600 tree contractors from utilities in other states to assist our highly skilled crews," it said in a release. "The utility's call center will be fully staffed to handle calls from customers. Other employees will assist with assessing storm damage, keeping the public away from any downed power lines and other functions that support restoration efforts."
A few years ago in the Wall Street Journal, James Altucher, then managing partner of alternative asset manager Formula Capital, looked at the worst hurricanes and scanned for U.S. stocks that performed well in the three months after each storm struck.
Campbell Soup Co. is one stock that consistently made the list – though investors might be taking a wait-and-see approach toward the storm before betting that consumers are going to stock their pantries with cans of soup. The stock was down slightly on Friday afternoon and has been stuck in a fairly tight trading range for most of the past three months.
Nucor Corp., the steel and steel-products manufacturer is also a consistent winner in Mr. Altucher's stock screen – presumably because it benefits from rebuilding activity.
There is also Toro Co. and Hill-Rom Holdings Inc., which make lawnmowers and medical equipment, respectively. Neither stock has been getting much of a hurricane bounce this week. But if Hurricane Sandy has the same effect on stocks as Hurricanes Katrina, Andrew and Hugo (and others), that could change.