Make Money From Hurricanes: Investment Thesis
Although many devastating effects are caused by hurricanes each year, they can be very helpful towards growing your investment portfolio. Large gains can be realized during tropical storms, hurricanes, and other natural disasters by purchasing stock in companies that sell products and services directly related to these events. Businesses involved in engineering, generators, batteries, home improvement, and water solution are all great options to choose from when wanting to see some good ($$$) come out of natural disasters.
AECOM ($ACM) is an example of a company that has historically done well during large natural disasters. AECOM engages in engineering and construction efforts for governments and commercial clients. After natural disasters, AECOM helps governments roll out reconstruction programs, infrastructure projects, and studies to help prepare for future weather events. During Hurricane Harvey’s time in Texas, AECOM stock gained 8%. Soon after Harvey, Hurricane Irma hit Florida, causing for $ACM to rally further. Since Harvey, AECOM’s stock price has more than doubled as they continue to provide assistance to previously impacted areas, such as Texas, as well as areas affected by newer storms.
AECOM continues to bring in money from large Hurricane Harvey contracts as rebuilding efforts are still underway. This is appealing to investors because (1) based on the amazing work that AECOM has done already, Texas will continue to use them for future infrastructure studies and rebuilding programs (recurring cash); and (2) rebuilding efforts take lots of materials and man power, meaning more money for AECOM.
Engineering companies are not the only beneficiaries of intense weather events, but also generator producers such as GENERAC ($GNRC.) Before Harvey’s landfall, $GNRC was averaging a daily volume in the 200,000 range, the day after the storm’s arrival, the volume quadrupled, sending the stock for a 22% rally in just 10 days. The stock continued increasing in price once Irma landed in Florida. Generators are a necessity when living in areas that are periodically affected by large weather events. Those who did not already buy a generator before a major storm buy one after realizing the struggle of living without power for long stretches.
More recently, GENERAC saw a 10% gain over 1 week from Hurricane Elsa. This rise in stock price was seen before the storm made landfall as investors were eager to make a profit from the generator company. The percentage gain during Elsa was about half of that seen during Harvey because of the difference in storm severity; despite this, $GNRC performed better than usual during this time span and was a good buy for investors focused on trading weather events.
Thesis: Investors should be fairly certain to see similar correlations between future storms and stock prices of companies related to those mentioned within this article. When a new storm is reported to make landfall soon, stocks within the home improvement, battery, and engineering sectors will usually see a price increase. Think about what you might buy before, during, or after a storm when considering companies to choose from while using this thesis.
Factors to watch out for: Storm severity and areas affected should be taken into account when deciding whether or not to purchase stock based on a weather event. For instance, during Hurricane Elsa, a category 1 storm, $GNRC saw a nice gain (as seen above,) while $ACM did not see much of a change. This is because $ACM does a lot of business outside the world of natural disasters, while $GNRC is focused solely around them.
Austin Conroy is not a financial advisor or professional. Please do not use this article solely to influence your trading and or financial decisions. Consult professionals and conduct your own due diligence before making any kind of investment.
