I’m watching hurricane Irma out the window dump rain and wind in my neighborhood. Florida and most of the southeast is going to have to deal with Irma in the next few weeks. Harvey battered down Texas just recently as well. These hurricanes are to be expected if you happen to live near the coast, but that doesn’t mean that stocks have them priced in all the time.
If you’re looking to take advantage of some stocks because of the hurricanes then you have a few ways to go about it. Think about which companies will benefit and which companies will be hurt by hurricane damage and that should give you an idea of what to look for.
Companies that will be hurt because of Hurricane Irma and Harvey
In the short term insurance companies (think Progressive -PGR and Allstate -ALL) are going to look like the losers of the hurricanes. People will sell them thinking that they’re going to have to deal with a lot of claims and lose money. Although that may be true in the beginning, what people always seem to forget is that insurance companies will rebound with higher premiums to make up for their losses. They always take advantage of situations like this when they can.
So what should you do? If you’re looking to buy into an insurance company stock then when you see it drop around this time (When hurricanes are hitting) it’s a good time to buy it. This is for sure an example of getting in while people are scared. Their fears are shortsighted. If I was trying to get into this section I would be buying the dips that come with the hurricanes.
The real losers are all the oil companies. When hurricanes come through they disrupt the oil companies in many ways. They damage can halt their operations entirely until things are fixed. There could be damage in the distribution lines that need to be fixed. It could be weeks before production is back to normal levels.
Hurricane Irma and Harvey will help these stocks
I’ve already talked about how insurance companies will eventually be helped by hurricanes, but what else will benefit from such destruction? Think property and rebuilding or replacing. People will need to fix their homes and replace their damaged cars. Look for stocks to benefit from these things.
Some of the big stocks here would be Home Depot and Lowes for example. But it doesn’t have to stop there. Think building materials and anything that has to do with them. People are going to have to fix their homes after the damage is done and companies that have their hands in this process are going to do well.
Automobile stocks should also do well. People will need to replace their cars and you can expect a lot of them to make their insurance claims to collect. Auto companies, like most other stocks, will react to bad news (or the forecast of bad news) by selling off and going down. Then once the bad news is over they will usually rebound and go higher than before. This is especially true when we’re in a bull market like we’ve been in for the past decade.
My advice, take advantage of the bad news and get in these stocks while people are selling them down. If you were planning to get in anyway, or you were looking for a good time to get in, then hurricanes and other natural disasters can be a great time to take advantage of stock price drops. This isn’t something new either, you can do your research and you’ll find numerous occasions where things like this happen when a hurricane comes to the US. Take advantage of it.