A Hurricane of Profits
Savvy Investors Stand to Reap Massive Returns
Last week, Hurricane Harvey devastated parts of Texas. This week, Hurricane Irma has been leveling Caribbean islands and is poised to wreak havoc on Florida. And Hurricanes José and Katia are right on their heels to add even more destruction to the already ravaged areas.
But, there's a great opportunity for investors hiding in the ruins...
Discounts Galore and Booming Businesses
Top-notch companies have been taking a beating because they’ve lost business. Or because they are going to lose business. Or because they are going to have to help rebuild the homes and businesses lost during the storms.
Now their stocks are so low, they’re in oversold territory and are screaming, “Buy me!”
Then, there are the companies that stand to see increased business and more sales coming in thanks to the storms. They range from home improvement stores, to furniture stores, to discount and grocery stores.
Some will even get a boost in business before the coming storms even hit.
So, today, I wanted to give you a list of some of my favorites. I’ll give you three companies in each industry that’ll be most affected. And each of them has its own special condition that makes it such a great investment.
I recommend all of them. Some of them are plays on downtrodden stocks poised to come back with a vengeance. Others are solid companies that stand to make even more money thanks to the storms rolling through.
So, let’s get down to it…
Flying the Friendly Skies
Airline stocks have taken a pounding recently thanks to lost revenues from the affected areas. Now’s a great time to buy in while they’re well-below their 52-week high prices.
- Income – Delta Airlines (NYSE: DAL)
Out of all the major airlines Delta comes in with the highest current dividend yield at 2.57%. Shares are down nearly 15% since their midsummer highs. That dividend will help them go up even more quickly.
- Biggest Potential Rebound – JetBlue Airways (NASDAQ: JBLU)
JetBlue has the biggest potential rebound out of all the public airlines. It’s currently trading around 23% below its 52-week high. But once the skies are clear, the stock is bound to soar back up to its former heights.
- Best Long-Term Future – Southwest Airlines (NYSE: LUV)
Southwest is my personal favorite airline. It pays a small dividend. Its stock is sitting about 18% short of the 52-week high. And it’s got massive potential for expansion. The airline is already flying all over Mexico, Central America, and the Caribbean. But there’s a good chance it’ll expand service north and east to cover Canada and Europe as well soon.
Sailing the High Seas
Cruise lines that service the Caribbean have been taking some pretty big hits these days as well. But once the hurricane season is over, they’ll be going full steam ahead and investors who get in now will be relaxing with some comfy profits.
- Income – Carnival Corporation (NYSE: CCL)
Just like Delta, Carnival provides the most income to investors in its industry. The cruise operator clocks in with a dividend yield of 2.39%. Its stock is about 6% shy of the 52-week high. And with that dividend, it’ll come back fast once cruise season is back on.
- Biggest Potential Rebound – Norwegian Cruise Line Holdings (NASDAQ: NCLH)
Norwegian has the most ground to cover to get back up to its 52-week high. But that means it also has the biggest potential rebound coming. It’s still the same company, and it’ll still be ferrying passengers around the Caribbean once the storms are only a memory. It’s currently 10% below its 12-month high price. But that should change once the ships are steaming out again.
- Untapped Value – Royal Caribbean Cruise Lines (NYSE: RCL)
Out of all the cruise operators, Royal Caribbean is the most undervalued. All its valuation measures are well below the average for the industry. And its PEG ratio of 0.9 suggests the market hasn’t priced in the growth investors should be expecting from this stock. For a value investor, this is a dream come true.
Funding the Reconstruction
Insurance companies have been taking a massive beating the past couple of weeks. That’s because investors are scared they’ll have to shell out gargantuan amounts of cash to policyholders whose houses have been destroyed. And they most certainly will be paying up on those policies. But insurance companies prepare for this kind of thing by investing money in other assets. They should have no problem coming up with the money and boosting sales by targeting everyone who wasn’t covered in this most recent wave of disasters.
- Income – The Travelers Companies (NYSE: TRV)
When it comes to paying shareholders, Travelers is top of the heap in the insurance world. It pays out a 2.45% dividend yield – that’s the highest in the industry. And with the stock only down 8% from its 52-week high, that nice quarterly payment will help shares get back up there in no time.
- Biggest Potential Rebound – XL Group (NYSE: XL)
XL Group has fallen more than any of its peers when compared to its 52-week high. But, again, that means it has the biggest potential profit as it climbs back up the hill. Right now, it’s 18% off the 12-month high price. But I’ve got confidence that it’ll get back up there again soon.
- Untapped Value – The Allstate Corporation (NYSE: ALL)
If you’re a value investor, then Allstate is the stock for you. Its price to earnings (P/E) and price to sales (P/S) ratios are both well below the industry average. And its PEG (price to earnings growth) ratio of 0.7 means the market is not valuing it properly and there’s a lot of untapped value waiting to be exploited.
Pre- and Post-Storm Profits
Feeding the Storm Troopers
There are going to be a lot of folks who decide to stay in their homes and try to weather the storm. That means they’ll be prepping by loading up on food and drinks for the duration. And there’ll be even more people who need to replace everything that gets damaged by the storm or goes bad while they’re holed up in a safer area. Discount stores and grocery stores operating in the area stand to see some big sales (if the looting doesn’t get out of hand, that is).
- Income – Target Corporation (NYSE: TGT)
In the grocery and discount store industry, nobody rewards shareholders as well as Target. The company pays investors a 4.27% dividend. And with shares off the 52-week high by about 28%, that extra income will help the stock recover that much quicker.
- Biggest Short-Term Potential – SUPERVALU Inc. (NYSE: SVU)
SUPERVALU has taken a big hit this year. It’s much farther from its 52-week high than its peers. But that means it’s got the highest potential for a huge recovery spurred on by preppers and people restocking after the storms pass. It’s fallen over 50% since it hit a 52-week high late last year. And that means it’s got the chance of coming back 50% or more in the future.
- Untapped Value – Big Lots Inc. (NYSE: BIG)
For the savvy value investor, there might not be a better discount store investment than Big Lots. By all valuation metrics, it’s trading at a discount to its peer average. And its PEG ratio of 0.8 means there’s a lot of growth that still hasn’t been factored into the price. Once the market catches on, it stands to see a big increase in price.
Rebuilding a Better Tomorrow
Probably the most obvious investment when it comes to the aftermath of any natural disaster is the home improvement industry. People are going to need lots of supplies to make repairs on their homes and businesses once the storms pass. And you can add to that all the people getting their real estate storm-ready with sandbags and storm-shutters (or just boarding up windows and doors).
- Income – The Home Depot (NYSE: HD)
Home Depot isn’t just a tool store. It’s also a dividend machine. It pays out the highest yield in the industry right now. The quarterly payments add up to a 2.27% yield that helps investors profits rise even faster than all the rest. Unlike most of the other stocks in this list, it’s right below the 52-week high. But I expect to see it setting new ones as folks start to rebuild.
- Biggest Short-Term Potential – Lowe’s Companies (NYSE: LOW)
Lowe’s is currently sitting about 9% below its 52-week high. Not as much potential for a huge rebound than some of the other stocks on this list. But there’s also a lot more potential for it to surpass that high with all the revenues rolling in after the hurricanes have abated. It also pays a 2.12% dividend to help profits pile up quicker.
- Specialty – Floor & Decor Holdings (NYSE: FND)
While Home Depot and Lowes are likely to get all the press when it comes to rebuilding after the storms, Floor & Decor is likely to get just as much increased business. It specializes in hard surface flooring and accessories. It sells hardwood, tile, laminate, and natural stone flooring products. Plus, the company sells to commercial businesses, professional installers, and do-it-yourselfers. When people need to replace their floors after the storms tear them up, it’s likely a lot of them will be headed here.
Making it Feel Like Home Again
Something a lot of investors forget about rebuilding after a disaster is that it doesn’t end with home repair. You’ve still got to refill those buildings with furniture before they become homes again. And judging by the destruction already caused by Harvey, and the strength of Irma and José and Katia, there are going to be a lot of empty houses left in their paths.
- Income – Williams-Sonoma Inc. (NYSE: WSM)
If you’re looking for an income-generating investment with potential for hurricane-related profits, look no further. Williams-Sonoma pays out the biggest dividend yield in the industry. It clocks in at a juicy 3.3%. And that’s going to help your profits stack up very quickly. And no doubt its showrooms will be packed with shoppers refilling their homes with furniture, cookware, rugs, curtains, lighting, and more.
- Biggest Short-Term Potential – Kirkland’s Inc. (NASDAQ: KIRK)
When it comes to rebounds in the furniture industry, Kirkland’s has the most potential. It’s fallen about 35% from its 52-week high. But folks will be looking for deals when they have to replace nearly everything. And they’ll likely be flocking to discount outlets like the ones operated by this company. And don’t forget, Kirkland’s sells alcohol. I bet there are going to be a lot of people looking for a stiff drink when they see the destruction wrought by the storms.
- Untapped Value – Bed Bath & Beyond Inc. (NASDAQ: BBBY)
Last but far from least, is Bed Bath & Beyond. To a value investor, it’s a dream come true. Every single metric has it trading at a massive discount to the industry average. And it even pays a solid dividend of 1.9%. It may not be your first thought when it comes to furniture, but it sells lots of it. Plus, just about anything else you might need to make your house a home again. And it also caters to commercial customers in the hospitality, cruise line, healthcare, and many other industries. So, it won’t just be homeowners flooding the stores once the waters have receded.
In every chaotic event, there’s an opportunity hiding. Sometimes they’re more obvious than others. Like the home improvement stores. It’s clear they’re going to see a ton of business coming their ways.
But what about the airlines? They’re losing money from these storms. But all things pass. And when the skies clear, those airlines will be flying high and their profits will soar once again. Buying them now while everyone else is running for the door gets you a great deal on incredible companies. And it’ll give you even bigger profits once the storm passes and the rest of the market comes out of hiding.
To investing with integrity (and a steel stomach),
Follow me on Twitter @AllBeingsEqual
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