On Aug. 29, Hurricane Ida made landfall in Louisiana as a category 4 storm, much stronger than initially forecast. As a major storm or hurricane approaches, there tends to be a surge in regional demand as last-minute activity and essential travel increase in preparation.
After a hurricane makes landfall, there could be lingering demand and supply concerns based on the amount of damage, flooding, and community displacement. Usually, home improvement, building, and financial services stocks perform well during this time. What are the best hurricane stocks to buy now?
Home improvement stocks have the potential to explode
Two companies that may benefit from a hurricane's aftermath are Home Depot and Lowe’s. These businesses' sales may rise after the disaster as people buy materials required to clean up and rebuild.
Home Depot is the world’s largest home improvement retailer, with nearly 2,300 stores across the U.S., Canada, and Mexico. Many customers will want to stock up on supplies before a hurricane makes landfall, and many more will purchase supplies in bulk afterward to repair any damage. As of last week, Home Depot stock had soared more than 110 percent since the early stages of the COVID-19 pandemic in mid-March 2020.
Lowe’s, like Home Depot, benefits largely from hurricanes. Lowe’s operated 1,973 home improvement and hardware stores in the U.S. and Canada as of Jul. 30, 2021. The company offers products for repair, maintenance, home decoration, and property maintenance. As of last week, Lowe’s stock had gained more than 200 percent from the early pandemic.
Companies that produce generators
If a hurricane causes significant power outages, demand for generators rises. Generator manufacturers such as Generac Holdings and Polar Power typically gain from this. Generac is one of the most well-known publicly traded home backup generator producers and was the first to develop affordable home standby generators. If a hurricane causes power outages, the company supplies home, light commercial, and industrial generators that are in high demand. Polar Power sells DC (direct-current) power generators.
Companies providing clean water solutions
There may be a shortage of clean water after a major storm, specifically when flooding affects public drinking water. Xylem, a water treatment company, is helping with hurricane recovery. The company has a presence in more than 150 countries and offers various solutions, including the treatment, testing, and transport of clean water.
Battery sales often rise before hurricanes because people purchase batteries to power their flashlights. Panasonic and Duracell are the two leading manufacturers and suppliers of household batteries and lighting products. In 2016, Warren Buffett's Berkshire Hathaway acquired Duracell from Procter & Gamble.
Marine Products designs, manufacturers, and sells pleasure boats. Most of these boats are destroyed and need to be replaced following a hurricane. Over the last decade, the stock's price has followed a consistent trend, rising during peak hurricane season months before falling throughout the winter and spring.
CarMax sees an uptick during hurricane
Vehicles are often damaged during a hurricane, boosting demand for used cars. CarMax is the leading used car retailer in the U.S. In the first quarter of fiscal 2022 (ended May 31), the company’s revenue increased by 138 percent YoY (year-over-year) to $7.7 billion. CarMax sold 452,188 vehicles through its wholesale and retail channels in the quarter, marking a 128 percent increase YoY.