Though investors enjoyed the best January for stocks since 1997, with the S&P 500 and Dow Jones indexes both jumping about 4%, the weather wasn’t quite so kind.
The brutal snowfalls last month broke New York City’s 86-year-old record for January snowfall – gobbling up all of the city’s $38 million budget for snow removal with over six weeks to go until the official end of winter. As of this writing, as many as 10 “warm weather” states in the south from Virginia to Texas remain under some type of winter weather watch, warning or advisory.
And unfortunately, for many regions the snow is set to keep on coming this weekend.
The especially harsh winter conditions across the country haven’t just taken a toll on local impact on roads and schools, but also on the bottom lines of many businesses. With fewer shoppers out and about, restaurants and retailers suffer – and with inclement weather, trucks and planes can’t make their scheduled deliveries.
Investors would be wise to take a good look at their portfolio in the wake of this harsh winter weather and note which of their investments could be adversely affected by the weather. Here are five such sectors to watch, which were slammed by the recent snowstorms:
Airlines
According to FlightStats, flight cancellations over the last three months have totaled nearly 55,000 in the U.S. – the since the firm began tracking those stats. And according to another trade group called FlightAware, cancellations this week alone have approached 20,000 as of Friday morning following sever winter weather that stranded an estimated 700,000 to 800,000 fliers. Airline fuel costs are squeezing margins, so there’s not a lot of room for error for carriers such as Delta Air Lines (NYSE: DAL), United Continental (NYSE: UAL) and AMR’s American Airlines (NYSE: AMR). Deferring those sales or losing prospective travelers due to the weather could really hurt profits for airline stocks. In the last week of December alone, some experts have estimated airlines lost $150 million in profits because of the snow.
Movie Theaters
Through niche marketing and the wonders of the internet, many stores have found ways to weather the storm. Take-out restaurants like Papa Johns (NASDAQ: PZZA) have found ways to capitalize on home-bound consumers with special deals, and online retail sales from companies like Amazon.com (NASDAQ: AMZN) or eBay (NASDAQ: EBAY)may actually get a lift in the first quarter as bored consumers are stuck inside with too much time to surf the web. But one business that is 100% reliant on people walking in the door is movie screening. The big theaters like
Cinemark (NYSE: CNK) and Regal Entertainment (NYSE: RGC) are sure to see a sting from the snow. The number of tickets sold since the start of the year is an estimated 79 million, the lowest figure since at least 1990, when around 70 million tickets were sold.
Utilities
Though electric utilities tend to band together and share resources to repair downed power lines and return electricity service after a storm, that doesn’t mean the extra workers work for free. The cost of repairs and support staff is sure to weigh on some regional utilities where the weather was particularly bad. Consider Washington, D.C, area where more than 500,000 customers lost power in one of the recent storms. The president of local utility Pepco (NYSE: POM) said that on top of repair costs, the call center was also working around the clock – including a period where some 120,000 callers dialed in across a four-hour period. This is surely going to take a bite out of the bottom line. What’s more, angry customers aren’t exactly quick to forget the poor treatment by local utilities that are effectively legalized monopolies. Thanks in part to massive outages across the last several years, Pepco is simultaneously being pressured into hundreds of millions of dollars in upgrades along with demands to keep rates low. That causes trouble down the road for regional utilities, in addition to the immediate impact of the weather.
Insurance
A universal truth about bad weather from the frozen north of New England to the normally sunny south is that snow always increases the chances of car wrecks and home damage. That’s bad news for insurers like Allstate (NYSE: ALL) and Travelers (NYSE: TRV). Look at the metropolitan Altanta area, where major insurers were swamped by over 2, 000 automobile claims in just one week as Interstates 75, 85 and 285 became slick with ice and snow in the middle of January. Multiply that by every other city and every other major snowstorm and you can understand why insurers will be smarting from the claims as well as the cost of processing paperwork.
The Super Bowl
The NFL championship is arguably the biggest event in February. Yes, even more important than Valentine’s Day– especially if your spouse is a Steelers or Packers fan. But it’s not just sports fans that love the event, it’s also businesses related to the extravaganza. According to tax advisory firm PwC, the the Dallas/Fort Worth area is expected to experience a record number of visitors and approximately $202 million in spending pumped into the restaurant and tourism industry there. At least, that was the total before a cold front rolled in and started to cool off Super Bowl fever. A once-a-year event like the Super Bowl doesn’t have the option of a rain check, and if bad weather keeps football fans tight-fisted then it could be very bad news for any related companies.
Jeff Reeves is editor of InvestorPlace.com. Follow him on Twitter or write to him at investingwithjeff@gm??ail.com.
