Hurricane Irma has us eyeing up two infrastructure stocks that generate a meaningful amount of revenue from the Florida construction and power grid markets (the bull case). On the flip side, if Irma through some blessing avoids land fall, we are also tracking (for our members) stocks that have been rising ahead of the hurricane, but may retreat in price (the short case).
Hurricane Irma has already hit some Caribbean islands in the Atlantic with greater wind gusts than have ever been recorded to hit the continental US. It could surpass Harvey, a hurricane that is estimates to have caused $170B and counting in terms of damage, and is disrupting industries from insurance to construction and tourism to import/export. In fact, some outlets are estimating that Irma could end up being the biggest hurricane on record.
It is unfortunate that as investors, in times like this we are compelled to search for companies that will experience an uptick in sales and earnings as a result of increased demand for their products. But in reality, it is sad is when companies like those in the airline and hospitality industries jack up their prices in a time where people are about to potentially experience a negative and life altering event. The smart ones would gain loyalty by having empathy.
Still, we need to face reality and try to put our emotions on the shelf for a moment. On the long side, the GeoTeam is tasked by its members to find stocks that will go up. We are avoiding insurance stocks at the moment for obvious reasons, but the dip in prices could very easily be a short term event and may lead us to buy some of them since we have a very high risk tolerance.
We do like companies that will help rebuild destroyed infrastructure in potentially unusual ways. There is an estimate that post Katrina, the cost of road sign replacement was over $800 million. Niche companies could do very well after the storm. The effects of Harvey and Irma could be felt for decades.
As one might expect, stocks like Lowe’s Companies Inc. (NYSE:LOW) and Home Depot Inc. (The) (NYSE:HD) are rising in price. Houses and buildings will have to be re-built or repaired, and these two blue chip companies are first in-line to supply the necessary goods. But, if you follow GeoInvesting’s model of digging deeper, you know that we mostly invest in smaller companies.
While Harvey and Irma are going to bring light to certain stocks, we have been high on infrastructure and building supply stocks well before these hurricanes were born. In 2016, we started to compile a list of these companies.
Our infrastructure list includes companies that generate a good amount of sales from Texas and Florida. One of them actually derives over 70% of its sales from Florida construction activity. Another one will be very active in restoring the power grid, should there be extensive damage. Irma is expected to potentially land in Florida, Georgia or the Carolinas by Saturday. So, some stocks are already starting to move.
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