Mother Nature Picks Wall Street Winners and Losers

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Last week was a rough one in the Northeast. Between the ground-rattling earthquake and the wet and windy savage fury of Hurricane Irene, natural disasters rocked the heavily populated region.

The wide-reaching storm left death and destruction in its wake. And while this hardly seems like the right time to think about the investing implications behind natural disasters, the exchanges don't wait for everyone to have electricity restored before separating the winners from the losers in the equities market.

The stock market can be ruthless. Some stocks get pummeled when disasters strike, while others climb higher.

Just as homeowners go through the frenetic process of fortifying their homes with plywood shutters and bracing for the downtime with bottled water, flashlight batteries, and Sterno burners, investors can also make sure they protect their portfolios from the implications.

As respectfully as I can be given the circumstances, let's go over the stocks to avoid -- and the ones to own -- before the next natural disaster rolls around, using the gusty and gutsy Irene as our guide.

Where the Losses Are Substantial

Estimates vary when it comes to the financial damage caused by last week's storm, but most indications suggest it will be in the billions.

Homeowners won't be on the hook for most of this. The real losers here are the property/casualty insurers, which will be hit with countless claims over the next few weeks for damaged homes and wrecked cars that will need to be repaired or replaced. They'll find a way to use the storm as an excuse to jack up rates -- bad for homeowners, but good for the industry in the long run. But do you really want to take that kind of chance with your portfolio? Some homeowners will be shocked to learn that flood damage coverage isn't part of their policies, but there will still be hefty tabs for the insurers to pay.

Investors won't want to bail out of the entire insurance industry. Life-insurance specialists, for example, aren't losing sleep over their actuary tables. It's business as usual there.

Another problematic sector will be financial services. Banks were already fretting about the homes on their books that are worth less than the outstanding mortgages. If too many homes were figuratively underwater, then imagine how badly values will sink now that many are also literally underwater.

The travel industry also misses out, with a wave of cancellations. AirlineForecasts LLC estimates the country's 10 largest carriers lost as much as $300 million because of the grounded flights. This is essentially a one-time hit, but the cruise lines may not get off that easily. Private Caribbean islands owned by Royal Caribbean (RCL) and Norwegian Cruise Lines suffered storm damage, initially impacting some itineraries.

Closer to home for landlubbers, one can imagine that there hasn't been a whole lot of mall shopping, theater-going, or restaurant dining in the Northeast over the past few days. Expect more than a few consumer-facing leisure companies to blame Irene for any potential softness during the current quarter.

Companies Riding the Tailwinds

If you want to find the winners, just follow the money.

Home Depot (HD) and Lowe's (LOW) are the obvious winners. The home improvement chains profit from the aftermath of a storm. The retailers also cash in as worrywarts stock up on power generators and plywood to protect their homesteads in anticipation of the hit. I took a closer look at the recent performance of both do-it-yourself chains this week.

The insurance claim buck doesn't stop there.
If falling trees and flying lawn furniture wrecked patios, wood-alternative decking giant Trex (TREX) will be a winner. If flooding ruins aging hardwood floors, Lumber Liquidators (LL) has plenty of planks to sell. If structural damage is significant, Builders FirstSource (BLDR) will also be busy.

Good news for Detroit: A totaled car is an insurance check away from becoming a new automobile purchase.

This isn't just a playbook for a storm that has come and gone. These are the names that investors should be researching the next time a named storm closes in.

More to Come, Unfortunately

It's already been a busy storm season. The National Weather Service claims that Irene is the 10th U.S. weather disaster to cause more than $1 billion in damage this year. We're only up to Irene on the hurricane calendar, with another two months of potential activity to come.

As homeowners and renters, we know the importance of preparing for natural disasters. It's probably sage advice for investors, too.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Lumber Liquidators. Motley Fool newsletter services have recommended buying shares of Home Depot, Lumber Liquidators, and Lowe's, as well as writing covered calls on Lowe's.



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19 Comments

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Tupalov144

mother nature is more stable than the market .lol SUMMER IS OVER is the BULL on its way

August 31 2011 at 7:27 AM Report abuse rate up rate down Reply
Terry and Mandy

This article is such crap. These stocks may improve for a short while, but bottom line, 6 months from now they will be back where they were. Some doing okay and some in the toilet. Insurance companies are such a racket, they are like going to a casino and hoping to be a winner, only to find out the "house always wins" So do insurance companies. Most of the damage from Irene will be flooding and most policy holders will not be covered for flooding. So unless the wind blew the roof off or blew out the windows and the rain caused the interior flooding, guess what, you are sh-t out of luck with your claim.

August 31 2011 at 2:21 AM Report abuse rate up rate down Reply
michelebachmann8

I'AM THE TEA PARTY QUEEN!......DON'T FORGET FOLKS TO GET YOUR COPY OF NEWSWEEK MAGAZINE IM ON THE FRONT COVER YOU CAN'T MISS IT I HAVE THIS CRAZY LOOK ON MY FACE. OH YEAH!!!!......IT'S ELVIS'S BIRTHDAY TODAY!!!!!!

August 30 2011 at 11:57 PM Report abuse rate up rate down Reply
1 reply to michelebachmann8's comment
notawhackjob

What a "DORK"

August 31 2011 at 8:01 AM Report abuse rate up rate down Reply
savemycountry911

Hi, democracks0. All we need for a praty now is evan.

August 30 2011 at 10:35 PM Report abuse rate up rate down Reply
2 replies to savemycountry911's comment
democracks0

AOL DELETED QUITE A FEW COMMENTS OUT JUST NOW.

August 30 2011 at 11:12 PM Report abuse rate up rate down Reply
1 reply to democracks0's comment
michelebachmann8

DO YOU WANT SOME TISSUE?

August 30 2011 at 11:58 PM Report abuse -1 rate up rate down
democracks0

HI
AOL IS DELETING ALOT OF COMMENTS RIGHT NOW. FUNNY HOW THEY DON'T DELETE BUSHNITE/BIRTHERSGO COMMENTS.

August 30 2011 at 11:15 PM Report abuse rate up rate down Reply
2 replies to democracks0's comment
michelebachmann8

AWWWW.......MORE TISSUE?

August 30 2011 at 11:59 PM Report abuse -1 rate up rate down
notawhackjob

Evan is a paid poster they won't delete his comments.

August 31 2011 at 8:48 AM Report abuse -1 rate up rate down
democracks0

THE AMERICAN TAX PAYERS ARE THE LOSERS FOR HAVING TO PAY FOR MICHELLE OBAMAS 10 MILLION DOLLAR VACATION TAB!!! THATS THE WAY THE OBAMAS SPREAD YOUR WEALTH!!

August 30 2011 at 10:33 PM Report abuse rate up rate down Reply
1 reply to democracks0's comment
savemycountry911

Libs think govmnt money falls from the sky like their welfare checks.

August 30 2011 at 10:36 PM Report abuse rate up rate down Reply
Hi Kathy & Joe

Again the oil companies take advantage of any opportunity to be greedy. If there is any type of catastrophe the price of gas goes up. Oil spill in the Gulf, prices go up. Hurricane on the Atlantic coast, prices go up. Gas prices jumped 7 cents overnight in my area. Price of oil is lower than it was in December 2010 and the national average price of gas was under $3.00 at that time. Who is doing the pricing of gasoline and how are they getting away with blatant price gouging? This is not just Bush anymore. Greed has no political affiliation.

August 30 2011 at 6:01 PM Report abuse rate up rate down Reply
dabrownman

No Obama picks all winners and losers, just the car unions, other unions who got Obama Care waivers, car companies, banks, investment banks, PE firms, hedge funds, medical device manufacturers, financial service companies, tanning salons,GM bond holders, health care companies, pharmaceutical companies, defense contractors, oil companies, coal companies, Boeing, Arizona, Alabama, gasoline refiners, green energy companies, BP and nay other company since the Marxists posing as socialist liberal democrats hate all companies - even the one s that give them money for reelection.

August 30 2011 at 5:40 PM Report abuse -2 rate up rate down Reply
mbradtke

What happened to the utility folks ? Pepco ? National Grid ? Any dividend cutting Empire's out there ?

August 30 2011 at 4:49 PM Report abuse rate up rate down Reply
evd10

I wouldn't worry too much about the insurance companies, whether life or casualty. How many have actually gone under in the last 100 years? Most even made it through the Great Depression just fine.

August 30 2011 at 4:18 PM Report abuse rate up rate down Reply
calvin8

crawford (crd/a) is going to be a big winner with this storm hitting, and more to come. They settle the claims for the insurance companies and they are going to be very busy!

August 30 2011 at 3:59 PM Report abuse rate up rate down Reply