Much like the residents on the East Coast, investors too are closely monitoring the path of Hurricane Florence, as it gets stronger and prepares to make landfall, starting Thursday. The storm has been assigned Category 4, which means winds could blow at a speed of 130 kilometers per hour, with severe threat to both property and lives.
Hurricanes have in the past impacted markets and investors seem to be cautiously adjusting their portfolio ahead of the impending storm. This has resulted in a decline in shares of insurance companies, while home improvement stores, car rental and building supply companies have risen considerably over the last few days.
Can Insurance Companies, Others Brave the Hurricane?
The Atlantic Hurricane season, which runs between June and November, created havoc last year, causing damage worth more than $250 billion in the United States. Understandably, insurance companies tend to be negatively impacted by such natural calamities.
Knock on wood, if destruction is massive, insured losses could be high. On Sep 10, shares of insurance companies took a hit, as Hurricane Florence moved closer to make landfall. Shares of The Allstate Corporation (ALL - Free Report) declined 2.2%. Also, shares of The Progressive Corporation PGR and The Travelers Companies, Inc. (TRV - Free Report) declined 1.6% and 1.9%, respectively. The Progressive Corporation has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Another sector that is prone to hurricane havoc is transportation. Along with property, severe hurricanes could hamper rail and container activity too, thus paralyzing infrastructure for transportation. Building supplies companies have a mixed effect from hurricanes. Cement and concrete companies tend to get hit from hurricanes.
Already, on Monday, shares of several cement and concrete companies along with heavy construction equipment suppliers plummeted. Shares of Martin Marietta Materials, Inc. (MLM - Free Report) dropped 2.9%, while U.S. Concrete, Inc. (USCR - Free Report) declined 5%. Shares of Summit Materials, Inc. (SUM - Free Report) plummeted 7.9% after the company said that Hurricane Florence and adverse weather conditions could severely affect its business in several markets.
Weathering the Storm
The massive damage caused by hurricanes increases demand in certain sectors. Historically, post hurricanes, a spate of industries have gained. It has been observed that shares of home improvement retailers have substantially increased post hurricanes, on demand for homes.
Shares of The Home Depot, Inc. (HD - Free Report) and Lowe's Companies, Inc. (LOW - Free Report) gained 2.2% and 2.6%, respectively. Shares of both the companies increased during the 2017 Atlantic Hurricane season, with Home Depot gaining 16.3% during that period.
Shares of roofing, insulation and generator companies too tend to gain post hurricanes. Generator maker Generac Holdings Inc.’s GNRC shares already jumped 5.6% on Sep 10, while roofing and insulation company Owens Corning (OC - Free Report) gained 3.8%. Shares of PGT Innovations, Inc. (PGTI - Free Report) and roofing supplier Beacon Roofing Supply, Inc. (BECN - Free Report) added 3.4% and 7.9%, respectively.
In 2017, hurricanes Irma and Harvey caused extensive damages to vehicles. Also, a huge number of residents were looking for last-minute options to drive away to safer places, which saw demand for car rentals going up post the calamities. On Monday, shares of car rental companies Avis Budget Group, Inc. (CAR - Free Report) and Hertz Global Holdings, Inc. (HTZ - Free Report) jumped 2% and 3.6%, respectively.
It now needs to be seen if Hurricane Florence weakens or takes a more severe form over the next couple of days. That said, the Atlantic Hurricane season over the years have made investors cautious, who closely monitor the storm and make adjustments to their portfolio, given that hurricanes have always impacted the markets.
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