Grab your umbrellas, stock up on bottled water and start thinking about what a rash of extreme weather could mean for the U.S. economy. In what seems to be a series of plagues striking the world, it looks like bad weather is coming soon. And if you’re still reeling from the effects of the novel coronavirus, it’s time for you to start thinking about stocks to buy to prep your portfolio.
Just like you buy batteries, eggs and milk, you ought to find some stocks to buy that are storm-proof.
As I reported in InvestorPlace’s live blog, meteorologists are calling for all sorts of weather extremes later this summer. Temperatures are set to be hotter than usual, while some regions will likely face heat waves, tornadoes and unusual storms. And for tourism-dependent states like Florida, a record hurricane season could make an already bad situation worse.
On one level, these storms will hurt cities that are already struggling from the pandemic. But Michael Arone, the chief investment strategist for the U.S. SPDR business, says there’s another level investors should be worried about. From InvestorPlace’s blog:
“As Arone wrote, one of the dangers of extreme weather is its impact on the economy. Storms that hit one region can tank an area’s small businesses, like what happened in Nashville at the beginning of March. Plus, consumers struggle in hot weather. Productivity drops. Per-capital income similarly drops. Hot weather may make the beach more inviting, but it’s bad for the overall economy.”
If these weather predictions come true, portfolios could end up in a lot of pain. But like many disaster scenarios, there’s a way to prepare. Start looking for stocks to buy that will benefit from extreme weather — or the fallout from storms. That said, these four crisis-proof names are a great place to start:
So with all of that in mind, let’s dive in.
Storm-Proof Stocks to Buy: Home Depot (HD)
Home Depot helps consumers before the storm, and the home-improvement retailer is there for them after. That’s why it’s perfect for this list of stocks to buy.
Before bad weather strikes, shoppers can stock up on generators, batteries and flashlights for peace of mind. And as we’ve seen with the pandemic, panic-buying can give companies a real boost. Ahead of Hurricane Dorian, MarketWatch’s Ciara Linnane wrote that this prepping would likely create a rally in HD shares. That said, expect similar price action heading into 2020’s hurricane season.
And once the storm is over, Home Depot is there. Recognizing its role in helping communities rebuild, Home Depot has long had a plan in place for natural disasters. Ahead of a storm, it works to make sure supplies are at locations that will need them most. It also has a team of volunteers that works with victims and first responders.
Even outside of the worst-case scenario, a bad storm will likely create demand for new siding, roofing and landscaping. With that in mind, Home Depot is a go-to retailer for all of those materials. In fact, as InvestorPlace’s Dana Blankenhorn recently wrote, contractors often opt for Home Depot over Lowe’s (NYSE:LOW).
Are you still not sure? Well, overall, the long-term outlook for HD stock is bright — even outside upcoming weather catalysts. More consumers than ever are downloading Home Depot’s app, and the pandemic sparked a major wave of do-it-yourself projects. This company isn’t slowing down anytime soon, making HD stock one to buy.
According to the National Flood Insurance Program, 90% of natural disasters in the U.S. involve flooding. However, standard homeowners’ and renters’ insurance policies don’t cover damage from flooding. That’s where Assurant comes in.
Assurant has a number of niche specialties, including mobile device protection and pre-funded funeral insurance. It’s the flood insurance business that makes AIZ stock attractive, though, and the company commands 12% of the flood insurance market.
Here’s the logic. Consumers hear about a particularly bad hurricane season — like the one experts are calling for in 2020. They panic when they realize their existing policies don’t cover damage, and that damage can be really expensive. In fact, FloodSmart estimates one inch of water can cost more than $25,000. So once consumers start panicking, the demand for flood insurance goes up — and industry leaders like Assurant start to see more interest.
Additionally, Assurant is truly an innovator in the flood insurance space. It has released several new products to help it stand out against other policy providers, including FlexCash. This offering provides up to $10,000 to policyholders, helping them get to hotels and cover unexpected emergency costs.
However, wouldn’t a bad hurricane season hurt Assurant? Unlike other policies, in the flood insurance space, a lot of the risk is on the policyholders. The New York Times’ Ann Carrns wrote that these companies often set higher deductibles. For instance, Florida allows hurricane and supplemental flood insurance policies to have deductibles as high as 10%.
Overall, Assurant has struggled in 2020, and share are down nearly 24%. However, hurricane season runs from June through November, which means it’s just getting started. Therefore, look for AIZ stock to pick up before the storms peak — which typically happens in September.
The case for Walmart is similar to that of Home Depot, but the big-box retailer has an even broader investing thesis. Like Home Depot, Walmart sells generators, batteries, flashlights, sunscreen and anything else you could need to ride out this summer’s weather.
However, Walmart has already been on a tear in 2020 thanks to its mix of essential and non-essential supplies.
In other words, consumers have embraced Walmart this year. Shoppers turned to Walmart for their favorite packaged goods, groceries and toilet paper. And that’s not going to stop anytime soon. So if fears of a natural disaster — or just plain old bad weather — surface, we’ll see another round of stocking up.
Local officials in Boca Raton, Florida, are already working to help the community prepare for the worst. In fact, they’re advising that families start buying what they need now. According to The Boca Raton Tribune’s Megan Mandatta, Walmart is already working to make sure its supply chain is ready for consumers to rush to its stores.
It’s also important to note here that Walmart is a worthy investment for several more reasons. The company pays a solid dividend, and WMT stock is reliable. However, Walmart is also looking to compete with Amazon (NASDAQ:AMZN) through new moves in healthcare, third-party sales and clothing retail.
As I reported for InvestorPlace’s live blog, this is a boring company going through a sexy makeover. And that makes WMT stock one of the best storm-proof stocks to buy.
According to the U.S. Food and Drug Administration, one of the dangerous side effects of flooding is the contamination of clean water supplies. That’s why Investopedia’s Barclay Palmer recommends Xylem to help investors protect their portfolios.
Xylem is a true leader in water solutions. As Palmer writes, it helps test, treat and transport water, and governments often partner with it in the aftermath of natural disasters.
What exactly is the problem? Hurricane season can cause water shortages. In 2018, Hurricane Michael destroyed a water tower in Mexico Beach. As a result, sewage contaminated the water, and residents of Florida’s panhandle were left waiting for emergency aid. At a nearby medical facility, toilets were overflowing with contaminated water, resulting in stressful patient evacuations.
Moreover, even more moderate storms can threaten water supplies. Water treatment plants might be forced to close, and floodwater could contaminate drinking supplies. Any contaminated water poses serious health risks to those who consume it.
That said, Xylem understands these risks. It has all sorts of water solutions including a chemical-free UV disinfection system that removes dangerous pathogens from drinking water. The company also offers filtration systems, and residential drainage and wastewater systems.
A “record” hurricane season is likely to bring Xylem record business, so make sure this company is on your list of storm-proof stocks to buy.
Sarah Smith is a Web Editor for InvestorPlace.com. As of this writing, she did not hold any of the aforementioned securities.