The Hurricane Trade

Growing up in Florida I have always watched hurricane season closely. Typically in Florida, it falls between June and November of any given year. I have witnessed the destructive forces of these storms and my thoughts and prayers go out to all those families who suffer great losses in these storms.

As a trader, I end up watching how the markets react to any event. Since I have been trading, I have always built a special “Hurricane Watch list” as these stocks usually have specific predictable activity when a big storm is brewing. I have added many stocks over the years, but there are some stocks that seem to move much more than the rest on the list. Here is my list. As you can see I have included the home supply stores such as Home Depot (HD) and Lowes (Low), insurance stocks, and some infrastructure stocks. I have also included Hormel (HRL) (spam), Energizer (ENR) (batteries), and Generac (GNRC) generators.


For me, the easiest way to see how these stocks react to hurricanes, is to go back to October 29nd, 2012 when hurricane Sandy slammed the Northeast coast. The normal reaction is for these stocks to rally up to the landfall, fall back for a week, and then rally again when the damage is more than expected. The biggest reaction always seems to be lumber. As seen below, lumber exploded to the upside almost 30 percent due to Sandy.


Another interesting play is to watch the insurance stocks. They usually sell off into the “event” on fears of huge claims, and then rally when traders realize they will be able to raise rates in the future. Here is a chart of Aetna (AET) in October 2012.


Interestingly, even though most TV “pundits” say to buy HD and LOW, I have found that these stocks move very little overall, when a big hurricane hits.


A better play is to trade the generator stocks. Sandy resulted in many people losing power for weeks. This stock went up 25 percent at one time.


The last stock I wanted to mention is HRL, which makes SPAM. Many people thought it was a joke when I mentioned that weeks without electricity could result in a huge demand for SPAM. Turns out, I was right! In fact HRL kept going, rallying almost 50 percent.


In summary, the list I provided I’m sure is omitting some related stocks, but go through that time period in 2012, and see if any of the other ones suit your investing style. For me, when I see a storm brewing, I will probably jump in to the products I mentioned above.

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Chris Brecher

Chris Brecher Stock Vice President

Chris Brecher grew up in Jacksonville, Florida. Though he went to college for Paleontology and Marketing, he settled for being a Stock Broker. In watching the brokers in his office lose every time by taking shots in options, Chris wanted to find out who was making money on the other side.

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