Labor Day marks the unofficial end of summer. Schools reopen, leaves start to change color, and consumers begin looking towards autumn holidays. However, that’s not the only event associated with early September. The hurricane season peaks around Labor Day, and historically, there have been devastating storms all the way through September and well into October.
Hurricanes have been responsible for thousands of deaths and extensive destruction of property. Recovering from the damage caused by a single storm can quickly reach tens of billions of dollars. Examples of the deadliest, most destructive hurricanes in the 21st century include:
- September 2005 – Hurricane Katrina, 1,207 deaths and $75 billion in property damage
- October 2012 – Hurricane Sandy, 233 deaths and $50 billion in property damage
- September 2017 – Hurricane Maria, 2,975 deaths and $90 billion in property damage
- September 2022 – Hurricane Ian, 150 deaths and $112 billion in property damage
A long list of industries suffer when hurricanes hit, from insurers to apparel companies. A substantial portion of the economy relies on facilities and equipment located in coastal regions, and the lengthy disruptions to business that follow hurricanes can decimate revenues for months.
However, the news isn’t all bad for investors who want to ensure their portfolios continue to grow through the hurricane season. There are industries – and particular stocks within those industries – that realize substantial profits from pre-hurricane preparation and post-hurricane rebuilding efforts.
These are five stocks to buy during hurricane season.
It’s no surprise that home improvement companies play an important role in rebuilding after a hurricane – particularly the larger chains that supply contractors in addition to individual homeowners.
Three of the best home improvement stocks include Home Depot, Lowe’s, and Sherwin-Williams. While any of the three are solid choices for stocks to buy during hurricane season, Home Depot is widely considered the best of the bunch.
Home Depot leads the pack in terms of home improvement market share. It controls roughly 17 percent of the US market, while Lowe’s is at around 12 percent. Home Depot stock is reasonably priced, trading at a price-to-earnings ratio of 20.15, but that’s not the stock’s most persuasive selling point. The feature that really stands out is its dividend.
Home Depot froze its dividend during the Great Recession, but since then, it has increased payments to shareholders every year. Home Depot’s current dividend yield is 2.59 percent. Lowe’s has been increasing dividends in consecutive years for much longer than Home Depot, but its dividend stands at 1.97 percent.
When an extreme weather event is predicted, there is a lot of uncertainty. No one can be sure exactly how long it will last, what damage will occur, and whether basics like food, electricity, water, and gas will be unavailable for days or weeks afterward. That puts big box stores that sell all of the essentials in the right place at the right time to meet consumers’ needs.
Walmart is one of the top retailers for hurricane preparation, making it one of the best stocks to buy during hurricane season.
Whether shoppers want to stock up on groceries, bottled water, and toilet paper before the storm or they need cleaning and repair supplies afterward, Walmart is well-positioned for revenue spikes anytime extreme weather hits. Walmart currently trades at a price-to-earnings ratio of 30.39, and Walmart stock has a dividend yield of 1.44 percent.
By the time Hurricane Ian had moved past Florida on September 29, 2022, roughly 2.7 million of Florida’s estimated 11 million homes and businesses had no power. On October 3, 2022, more than half a million homes and businesses were still in the dark. And that’s not the worst-case scenario.
A look back at 2017’s Hurricane Maria is even more alarming. All of Puerto Rico’s homes and businesses lost power, and it took six months to get most of them reconnected. In some of the island’s more remote areas, electricity wasn’t fully restored for a full 11 months.
One of the most common methods of protecting against loss of electricity is backup generators and other forms of emergency power supply. Facilities like hospitals need a minimum level of power to keep lifesaving equipment operational, so they typically install commercial-grade backup generators.
Other businesses, like computer data centers, buy backup generators to protect sensitive technology assets. Power restoration is built into their emergency planning, and they have year-round relationships with companies that manufacture, install, and maintain generators.
Hurricane season reminds homeowners and other businesses that a lengthy blackout is – at best – inconvenient. At worst, it may bankrupt a business or make a home uninhabitable. That leads to a surge in generator sales – especially right before and after hurricanes. Generator companies like Polar Power, Caterpillar, and Generac often see revenues go up during hurricane season, which eventually leads to a boost in their share price.
Generac is one of the largest companies to offer backup generators for homeowners. In fact, it was the first to develop units that average consumers could afford. Since it went public in February 2010, Generac stock is up more than 750 percent.
The past year was difficult for Generac shareholders because the stock price dropped precipitously. However, it appears Generac is beginning to recover, which may signal that now is the right time to buy Generac stock.
Strong winds and torrential rain can damage even the sturdiest buildings, and the combination of falling trees and flooding has been known to take out homes, roads, and other infrastructure.
Engineering companies are key to ensuring communities fully recover from weather events. They test structures to identify hidden safety issues, and they support repair and rebuilding efforts. More importantly, in areas where hurricanes are likely to hit, they partner with local, state, and federal government agencies to prepare.
AECOM and Fluor Corp are two engineering companies that have experience with disaster recovery, and both have supported the Federal Emergency Management Agency (FEMA) in the aftermath of hurricanes like Katrina, Sandy, Maria, and Ian. However, in a head-to-head comparison, the edge goes to AECOM stock.
FEMA’s long-standing relationship with AECOM goes back more than 40 years, and FEMA has selected AECOM for a number of lucrative contracts. For example, in 2022, AECOM announced it had been awarded a $300 million contract for community resilience projects, including hazard mapping, flood risk analyses, disaster response, and risk reduction.
In addition to its work on preparing for and recovering from weather-related disasters, AECOM handles the engineering for a wide variety of other projects around the world. These include bridges, highways, commercial buildings, government facilities, water infrastructure, and the infrastructure related to the transmission and distribution of power to homes and businesses.
For example, in August 2023, the company announced it had been chosen for three large, complex, and expensive projects, including a new strategic road connecting Lantau Island and Tsing Yi in Hong Kong, the Brent Spence Bridge Corridor project, and the renovation of the S Concourse at Seattle-Tacoma International Airport. These contracts and others lead to reliable revenue and make AECOM stock a buy.
Water Treatment Companies
Much of the destruction from hurricanes is related to rain. One of the most notable examples occurred when Hurricane Harvey hovered over Houston, Texas, for several days in August 2017.
Harvey’s heaviest rainfall was about 25 inches in a 24-hour period, and some areas got a total of 60 inches by the time the storm moved on.
In addition to structures being destroyed during the flooding, many more had to be demolished in the months that followed due to mold.
With that much water flowing, it might seem like there is plenty to drink. Unfortunately, that’s not the case. Infrastructure designed to clean and carry potable water to homes and businesses is typically contaminated by floodwaters. The water picks up industrial waste, agricultural waste, bacteria, and sewage as it flows through the environment.
Water treatment companies are critical in the hours and days after a hurricane. Among other responsibilities, these companies test and treat the water supply to ensure the water is safe for human consumption. When necessary, they may transport potable water to affected areas.
Xylem is a market leader when it comes to all things water, from designing, manufacturing, and applying engineered technologies for the water industry to transporting, testing, and treating water. It also has a division dedicated to advancing water analytics tools, as well as a division focused on conservation and intelligent use of this scarce resource.
The company is based in Washington, DC, which is ideal for disaster response. In addition to ensuring an adequate supply of drinking water for those impacted by hurricane damage, it has an extensive fleet of water pumps located throughout the country. Some of these can operate underwater, and Xylem keeps them at the ready for recovery efforts – particularly during hurricane season.
Analysts are confident that Xylem will continue its slow, steady growth, with periodic spikes during extreme weather events and other natural disasters. Such occasions may contribute to the company’s top and bottom-line results, but the true growth driver may turn out to be completely unrelated to hurricanes.
In 2022, a dramatic increase in inflation coupled with new laws related to international trade motivated many businesses to start bringing offshore manufacturing back to the United States. That’s especially true of tech companies now that the CHIPS Act is in place.
Manufacturing and industrial companies use about 12 percent of the nation’s public water supply, and that figure may grow as manufacturing returns to the US. Xylem is in an excellent position to increase revenues and boost its bottom line as it designs water infrastructure for new industrial and manufacturing facilities.
Xylem stock has gained nearly 300 percent since it went public in 2011. It trades at a price-to-earnings ratio of 53.83, and its current dividend yield is 1.30 percent.
Hurricane Season Stocks: The Bottom Line
Though these five are some of the best stocks to buy during hurricane season, it’s important to keep a close watch on all of them year-round. Hurricane stock prices often spike just before, during, and after a storm, but afterward, they even out again until the next disaster. Investors planning to sell within the year are at risk of realizing losses if the timing of their trades is off.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.