Hurricane season is not for the faint of heart. It has far-reaching negative implications for the broader economy and the investment world. But there are companies out there that actually benefit from the season. So, it is not surprising that many people seek out the best stocks to buy to profit during this time.
We all hope for safety and security in the coming months. But the Atlantic hurricane season has kicked off and it’s expected to bring a higher-than-average number of storms in the months ahead. We need to be prepared. That includes rechecking our portfolios for stocks that will do well during this time and help in the rebuilding efforts.
This list consists of building, home improvement and financial services stocks that typically do well during this time. If we do end up having an above-average storm count, these securities will likely end up beating the S&P 500 index.
- Home Depot (NYSE:HD)
- Generac Holdings (NYSE:GNRC)
- Marine Products (NYSE:MPX)
- Berkshire Hathaway (NYSE:BRK.A,NYSE:BRK.B)
- Lowe’s Companies (NYSE:LOW)
- Masco (NYSE:MAS)
- CarMax (NYSE:KMX)
Hurricane Season Stocks to Buy: Home Depot (HD)
It can be tricky to buy stocks during hurricane season. There are a plethora of new names making waves. But I always prefer tried and tested companies that perform well regardless of what time of the year it is. Home Depot is one such stock.
It is the world’s largest home improvement specialty retailer, with more than 2,200 stores in the United States, Canada and Mexico. It has always performed exceptionally but the pandemic was a game-changer for this stock. The HD stock price increased 91.8% from the depths of the early pandemic in mid-March 2020 through last month.
As people were shuttered in, they had more time to spend on home and backyard projects, leading to a surge in demand for its products. So, the company emerged as a clear winner during the pandemic.
Much of the same logic can be applied for hurricane season. Many loyal consumers will want to stock up on supplies before any difficult period and many will buy supplies in bulk after the fact so that they can repair any damage, making HD stock a must-have for your portfolio.
Generac Holdings (GNRC)
From an all-weather performer to one that is a bit more niche, Generac Holdings is one of the foremost producers of generators for residential, light commercial, and industrial markets.
Now you may be thinking this stock is less appealing than say a Home Depot. But it’s an excellent one to have in your portfolio. GNRC has outperformed the S&P 500 by 653.5% and its sector by 667.8% in the last five years.
Ultimately, though, you will get bang for your buck during this season. Nine in 10 major power outages in the U.S. in recent years have been caused by hurricanes. Hence, when that inevitably happens during the upcoming season, you will see people rush to their local Generac supplier and lap up its products.
Marine Products (MPX)
Marine Products designs and distributes pleasure boats. Many of these boats suffer substantial damage during a storm leading to inevitable demand to replace or repair them. Consequently, MPX becomes the ideal play to benefit from storm season.
However, you have to time your entry and exit positions well. There is a consistent pattern that you can exploit that has emerged during the last decade. MPX stock jumps consistently during peak hurricane season months before dipping again during the winter and spring. So, this is not an all-weather stock by any means.
From a fundamental perspective, everything is going very well for the company. The bottom line and the top line have grown 11% and 3.3%, respectively, in the last five years. The business is a stable performer that is meandering along at a steady pace. But during storm season the stock has the potential to explode.
Berkshire Hathaway (BRK.A, BRK.B)
No prizes for guessing why I strongly recommend Berkshire Hathaway on every occasion. It is one of the safest bets in the investment space and that is why it trades at a premium valuation.
Class A shares, which lie well out of reach for the everyday investor, are not something I recommend, purely because they are so expensive and have limited upside left. However, Class B shares of Berkshire Hathaway are trading at a very attractive price point.
If you want to gain exposure to the property and casualty industry, these shares provide good value. In case the storm damage is moderate, insurers keep the premiums and stocks often go up. On the downside, demand and pricing may fall if there is a lighter hurricane season.
Lowe’s is very much similar to Home Depot, both in terms of long-term performance and attractiveness among hurricane stocks. The company operates over 2,200 stores across the U.S. and Canada, serving “approximately 20 million customers a week.”
Much like Home Depot, the pandemic was a bonanza period for Lowe’s. In the last six quarters, Lowe’s managed to beat analyst estimates all but one time, an extremely successful track record, especially during the pandemic. While HD stock increased 91.8% from early pandemic through May 2021, LOW stock gained 164.3%.
The retailer’s first-quarter 2021 earnings reaffirm this positive trend. Earnings and revenue beat expectations, owing to effective cost-control measures and excellent brick-and-mortar store sales.
For many of the reasons already described in the case of Home Depot, Lowe’s has a lot to gain from the hurricane season.
Another positive Lowe’s is an S&P 500 Dividend Aristocrat — a company in the S&P 500 that has paid and raised its base dividend every year for at least 25 consecutive years. When you combine all these factors, it is no surprise that this is one of the premier stocks to buy during hurricane season.
Another stock that does very well during hurricane season is Masco, which produces home improvement and building products. It has two major business areas through which it does business: the plumbing segment and the decorative architectural segment.
Both these segments do very well during hurricane season, typically benefiting from rebuilding. Overall, things have been going well for the company for the last several years.
In its latest quarter, Masco has reported $1.97 billion in revenue, a year-on-year change of 25%. In addition, the company reported an adjusted EPS of 89 cents, a growth of 89%. The EPS figure also beat analyst expectations by 34.8%.
MAS stock is up 25% in the past 12 months, pays a 1.57% dividend yield and has consistently increased its return on equity of the last five years, reaching 22.5% in 2020.
During a hurricane, your car can sustain damage. You are not alone. However, whenever that happens, it inevitably leads to a rise in the demand for used vehicles. That’s where CarMax, the largest used vehicle retailer in the U.S., comes into play.
In fiscal 2021 (February), the company retailed and wholesaled 751,862 and 426,268 used vehicles, respectively. Sales and EPS are up 4.2% and 19.9% on a trailing 12 months basis.
Considering the business model, it is not surprising that the company had a great year. However, as we enter the hurricane season, it is important to make sure you have KMX stock in your portfolio.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.