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David Goodloe
David Goodloe
Articles (769) 

Shelter From the Storms

Which industries will benefit from hurricanes? Which will not?

September 08, 2017 | About:

Hurricane Harvey is receding from the public’s memory, but there is still much to do before normalcy is restored in South Texas.

Attention has shifted to Hurricane Irma, bearing down on Florida and expected to make landfall this weekend, and two more hurricanes in the Atlantic are threatening to make landfall as well.

While the figures are sure to change, the cost to restore Texas to its pre-hurricane status is estimated to be $180 billion. Irma has been downgraded from a Category 5 storm to a Category 4, but it could be more costly than Harvey, which was also a Category 4 when it made landfall on Aug. 25.

And then there are those other two hurricanes, either or both of which could make landfall this weekend.

All this simultaneous hurricane activity is virtually unprecedented and appears all but certain to leave devastation in its wake unlike any seen before. Which industries stand to benefit? Which industries stand to lose?

Sissy Lappin, co-founder of Houston-based ListingDoor.com, offered some observations on real estate from Hurricane Harvey’s ground zero.

“The Houston Association of Realtors has already added two new fields to the Multiple Listing Service [Home Flooded in Harvey and Property Flooded in Harvey],” Lappin said. “People will nest for 90 to 120 days and then they will decide to either rebuild or buy. If your home did not flood, in the next 90 days your value will go up 15% to 20%. This is the first question a buyer is going to ask. ‘How high did the water come?’ These homes are now a high commodity.”

Lappin said the short-term effect (the next five years) on the Houston real estate market will be that “people will only want homes that did not flood.” In the long term, “the flood will be a faded memory, and people will think it can never happen to them,” Lappin said. “It reminds me of the stock market!”

“When the fourth-largest city in the country needs to be rebuilt, contractors and subcontractors make a killing,” noted Roman Zrazhevskiy, founder and CEO of Central Texas-based Ready To Go Survival, a retail brand specializing in personalized emergency preparedness. “There aren't enough local businesses to take on all the projects so I predict a large influx of recovery professionals coming in from all over the country to assist.

“Retail chains like Home Depot (NYSE:HD), Lowe's (NYSE:LOW) and others that specialize in hardware and DIY will certainly see a sales spike.”

On the negative side, Zrazhevskiy said, “Harvey and Irma will certainly put many small to medium-sized insurance companies out of business as was witnessed in 1992 after Hurricane Andrew."

Considering capital will be flowing into recovery efforts, I believe retailers selling discretionary items will take a hit.”

John Engle, president of Illinois-based Almington Capital, expressed concern about the effect on small businesses.

“The impact of these hurricanes will be substantial, resonating across regional and national economies,” he said. “Small businesses, especially those that weren't insured, will suffer worst. That is an emerging problem in the wake of Harvey especially. Construction and development industries will benefit immensely, though. The rebuilding effort will be costly and take a lot of resources, but with federal money pouring into relief and recovery projects, firms that can participate in the reconstruction should see lots of work in the months, and in some cases years, ahead.”

John Boyd Jr., principal of New Jersey-based The Boyd Co. Inc., a location consultant, focused on businesses being affected by Irma.

“The insurance, retail and hospitality sectors – airline, hotel and cruise industry stocks in particular – are already being impacted negatively the most by Irma,” Boyd said. “Restaurant chains popular in South Florida are also seeing a decline.”

Michael Lerner of Mineola, New York-based Promos On-Time, said, “Our promotional products company relies on two large suppliers including Bic Pen who are located on the coasts of Florida. Our rush production service has been halted as both factories have suspended production a week or longer.”

So who stands to benefit in the wake of these storms?

Ron Vejrostek of Colorado-based Vejrostek Tax and Financial said the “obvious winners” will be home improvement companies like Home Depot and Lowe’s, both of which were up more than 1% by market close Friday, “but you can go deeper as in appliance makers – for example, Whirlpool (NYSE:WHR) and General Electric (NYSE:GE) – or manufacturers of building products – PVC piping, drywall, paint, etc.”

Vejrostek said that “the companies you would not want to be investing in right now would be insurance companies, the airlines or utility companies that service those areas or REITs that have properties in the affected areas.”

Bill Kirk, CEO of Bethlehem, Pennsylvania-based Weather Trends International, agreed that companies like Home Depot and Lowe’s will benefit as people rebuild and repair.

Kirk also said grocery prices will go up as the produce market will be affected.

Alexander Kuptsikevich, analyst for London-based FxPro, voiced concern about the effect on the dollar.

“If Irma’s impact on the U.S. economy becomes more significant,” he said, “this may add pressure on the dollar and call into question a third rate hike that was otherwise expected of FOMC earlier this year.”

Disclosure: I own none of the stocks mentioned in this article.

About the author:

David Goodloe
I'm a journalist by training. I grew up in Arkansas and earned my B.A. at the University of Arkansas. I earned my master's degree at the University of North Texas. My background includes stints at newspapers in Arkansas and Texas and teaching news writing and news editing to students at the University of Oklahoma and Richland College here in Dallas. I'm a writer/editor at GuruFocus.

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