The old Wall Street saying “Sell in May and Go Away” might work for the broader market most of the time, but it doesn’t appear to apply to hurricane stocks.
Forecasters expect this year’s Atlantic hurricane season — which runs from June 1 to Nov. 30 — to vie for the record books. Researchers at Colorado State University figure there’s a 72% chance of at least one major hurricane (that is, category 3, 4 or 5) slamming into the U.S. coastline this season. (Over the last century, the probability of such an event has been 52%.)
Furthermore, researchers expect four major hurricanes to form this season amid a total of 18 named storms. In the words of WeatherBell Analytics: “A wild season is on the way.”
If there’s any bright side for traders, it’s that flooding, wind damage, power outages and all the other destruction stemming from big storms does wonders for hurricane stocks. (At least it did last year.)
Here are stocks that stand to benefit from an active hurricane season:
Click to Enlarge Home Depot (NYSE:HD), the nation’s largest home improvement retailer, sees sales spike both ahead of and in the wake of big storms. From flashlights to batteries to generators, folks battening down ahead of the storm surge pile in to prepare.
Once the weather clears, Home Depot sees brisk business from do-it-yourselfers and professional contractors working overtime to repair and rebuild.
During last year’s hurricane season, Home Depot shares rose 36% vs. an 11% gain for the broader market. The stock really got interesting in October when Hurricane Sandy hit the Eastern Seaboard.
Click to Enlarge Just like Home Deport, Lowe’s (NYSE:LOW), the nation’s second-largest home improvement retailer, also gets a boost from hurricane preparation and repairs.
Indeed, Lowe’s said rebuilding after Hurricane Sandy gave results a big boost in the final quarter of the year, helping it top Wall Street’s earnings forecast by 3 cents a share. Revenue likewise came in higher than expected.
Anticipation of robust hurricane-fueled results helped Lowe’s shares clobber the broader market during last year’s hurricane season, beating the S&P 500 by more than 16 percentage points.
Click to Enlarge Generac (NYSE:GNRC) makes generators for residential, commercial and industrial use. With major storms and widespread power outages becoming more common, homeowners and businesses aren’t waiting for the lights to go out anymore.
They’re buying generators now.
That helped propel Generac to record first-quarter results. Net income jumped to $50.7 million from $30.1 million in the year-ago period on a 36% sales increase.
Generac’s stock rose 35% during the 2012 Atlantic storm season vs. an 11% gain for the S&P 500 — all thanks to Hurricane Sandy.
Click to EnlargeGranite Construction (NYSE:GVA) provides provides construction services to federal and municipal governments.
True, government spending is on the decline and the effects of the sequester aren’t doing such projects any favors, but that won’t matter much the next time bridges, roads and tunnels are washed out or flooded by a disastrous storm surge.
Granite’s stock rallied 41% over the course of last year’s hurricane season, beating the S&P 500 by 30 percentage points.
Beacon Roofing Supply
Click to Enlarge Beacon Roofing Supply (NASDAQ:BECN) distributes roofing and building materials, which usually suffer from extended bouts of nasty weather.
After all, bad weather is bad for roofers, at least in the normal course of business. New construction and repairs slow down when it’s too wet or too cold. But hail storms, tornadoes and hurricanes drive a surge in repairs once the weather’s cleared.
All that demand for roofing supplies and related building materials helped propel Beacon to a 31% gain in last year’s hurricane season, beating the broader market by 20 percentage points.
As of this writing, Dan Burrows did not hold positions in any of the aforementioned securities.