Thousands of Americans are still picking up the pieces after deadly tornados through six states last month. More specifically, the damage done from the tornado in Kentucky really stood out. In fact, the destruction of towns and thousands of homes in the deadly tornadoes is now one of the worst disasters to strike Kentucky. However, as cynical as it may seem, there are certain tornado stocks that will benefit from the disaster.
Overall, the local economy is paralyzed. Some sectors will likely suffer more than others. It is difficult for any one group or industry’s profitability in such circumstances due to complicated economic factors like supply-demand ratios, which constantly change according to the severity of the damage. However, certain sectors will benefit as people rebuild their lives.
With that in mind, the list below is four of the sectors and stocks that could benefit from this disaster. It is by no means an exhaustive list, and an event as devastating as the Kentucky tornadoes impacts every aspect of our economic life. However, this list only highlights those areas that stand to benefit directly from this latest issue. And as residents rebuild their communities, they will play a key role in these industries and incumbent companies.
- Agriculture, Food, and Related Industries
- Automotive Industry
- Home Furnishings Retail Industry
- Critical Infrastructure Sectors
Now, let’s dive in and take a closer look at these sectors and the tornado stocks within them.
Sectors With Tornado Stocks: Agriculture, Food and Related Industries
Major crops grown in Kentucky include corn, soybeans and hay. Additionally, tobacco is also an important crop for farmers. The Midwest is a region of the United States that has seen increasing planted acres in recent years. The area harvests more than 75% percent in corn and soybeans. But there are other crops too. The harsh winter weather has certainly damaged the crops in this area. The agriculture industry provides various agricultural commodities, including grains and livestock. To begin with, they also produce fertilizers (like phosphorus), packaged foods like soybeans or cereal and machinery used in harvesting these crops.
Stocks in the agriculture sector have been on a roll during the last year, with VanEck Agribusiness ETF (NYSEARCA:MOO) reaching new heights versus the S&P 500. If you want to have a more focused investment, you can pour your capital into companies involved in a particular niche. For example, Corteva (NYSE:CTVA) and Canada-based Nutrien (NYSE:NTR) all have their own unique places within the agricultural industry.
Furthermore, two other companies are doing very well in the sector. ICL Group (NYSE:ICL) is a leading manufacturer of fertilizers and specialty agricultural chemicals to customers in Asia. Shares are up 56% in the last six months. But considering its solid fundamentals, expect more growth in the future.
Rounding up the agriculture stocks is Deere & Co. (NYSE:DE), a company that specializes in agricultural equipment for both farmers and ranchers alike. They provide the necessary parts to keep your machine running smoothly while also raking in millions for replacement supplies. It just upped its dividend by 17%, making this company one of the most generous in the industry. Among tornado stocks, Deere & Co. is a great income play as well.
The tornadoes that touched down left a wake of destruction in their path. The severe weather caused extensive damage to cars, homes and businesses across the Midwest — but it didn’t stop many people from going about living life as usual. The supply of tractors will have to increase for farmers to replace damaged equipment.
It’s no surprise that one of the companies doing well during this crisis is Tractor Supply (NASDAQ:TSCO). America’s largest rural lifestyle retailer has recently seen its shares hit a new all-time high, and there are several reasons for investors to be excited about how well they’re performing in the future — not least because it seems like nothing will stop them from firing on all cylinders.
Tractor Supply reported exceptional results in fiscal 2020, with revenue jumping by 27.2% and net income rising 33%. The company attributed this growth to more people paying attention to their homes during the pandemic and an increase in customers purchasing items for agriculture activities like tillage equipment or animal feeders.
Shifting gears a bit, the tornadoes will also lead to a large uptick for car companies with a large selection of trucks. There are several automobile manufacturers of the ilk, but Ford is the best if you want to invest in space. The Ford F-Series has been America’s best-selling truck for 40-consecutive years and now has 35-straight wins as Canada’s top vehicle choice. The history of Ford trucks is one filled with innovation. From their early days to today, they have worked tirelessly on improving capabilities for job site owners so that all may be completed efficiently and effectively — even when it comes down to hauling or pulling heavy loads.
Sectors With Tornado Stocks: Critical Infrastructure Sectors
If you are looking to invest in the recovery, consider buying stocks of companies that deal with infrastructure. These include building materials and construction-related products like cement or steel rods. After a devastating storm has passed through an area, residents will need them. The Materials Select Sector SPDR Fund XLB (NYSEARCA:XLB) offers great potential for growth following any natural disaster; it is one such fund worth considering.
After every natural calamity, rebuilding roads and related infrastructure is key. Hence, it makes sense to own Vulcan Materials (NYSE:VMC). It is the largest producer of construction aggregates, including crushed stone sand and gravel; they also produce a variety of asphalt cement. This means they produce most materials needed for paving projects or repairing existing surfaces in need.
The company has more than 360 aggregate facilities spread across the country, with 64 years in operation under its belt, marking them as a clear leader in the field.
Meanwhile, the most iconic construction and mining equipment maker, Caterpillar (NYSE:CAT), is a staple on Wall Street for decades. Their products are so essential that they’re impossible to think about in modern life without their influence. Caterpillar’s yellow trucks and machinery are everywhere, from roadways all over our cities with heavy traffic every day, or intricate machinery used by experts deep below ground level. They’re not just on construction sites, either. You can find them in nearly every major infrastructure project around the world. Considering its size and ubiquitousness, you cannot make a safer investment in tornado stocks.
Home Furnishings Retail Industry
The destruction caused by recent tornadoes in Kentucky will call for rebuilding structures. Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) are thus in a great position as these two retail stocks have already begun taking measures to help their customers recover from the tornado. The storm will act as a tailwind for the homebuilding sector, which is already doing well.
Lennar (NYSE:LEN) has been a staple of the American housing market for decades if you want to invest in housing directly. With more people needing homes, their business should benefit from strong pricing power — which means they are poised nicely right now with an opportunity at just the right moment.
Taking a macro-view, the real estate market experienced one of the hottest home-buying sprees in history last year. The housing market is currently experiencing a nationwide bottleneck. And you can blame it on the pandemic. The number of people who have left urban areas for suburban homes in droves over recent years means there are not enough houses available to meet demand from both buyers and renters — leading up many bottlenecks across different industries, including construction sites. However, in the midst of a crisis, lies great opportunity. You can purchase excellent homebuilding stocks at a steep discount because of these issues.
On the publication date, 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 in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. You can check out his analysis on InvestorPlace and TipRanks.