3 Stocks for Hurricane Season - Interview With James Altucher

Includes: CPB, HRC, NUE
by: Wall St. Cheat Sheet

Tropical Storm Agatha has already killed ~150 people and left a gaping sink hole in Guatemala. That means hurricane season is about to start dominating the media — especially with all the prospective consequences from the BP oil spill in the Gulf.

I caught up with James Altucher to share his winning stock picks for hurricane season.

Damien Hoffman: James, you recently wrote a cool article about a scan you ran to find the best performing stocks for hurricane season. Can you share your methodology?

James Altucher: Sure. I looked at the Top 10 most expensive hurricanes in history. Then I scanned through the S&P 500 (NYSE: SPY) to see which stocks were up after every single one of those most expensive hurricanes.

For example, Campbell Soup (NYSE: CPB) was consistently profitable after every single expensive hurricane. That makes sense because people are stacking up on canned goods right before the hurricane because they anticipate they’re not going to be able to shop during and afterwards. However, consumers are probably over-stacking because they over-anticipate some hurricanes’ damage.

Interestingly, hurricane season tends to coincide with Back-to-School season. So maybe Campbell Soup does well with kids taking soup to school.

I also like CPB because over time, management is going to distribute cash to shareholders. And they’re always going to eventually grow again no matter what happens to the economy. It’s a good solid stock for a portfolio.

Damien: What are some others on your list?

James: Hill-Rom Holdings (NYSE: HRC) which makes hospital beds, patient room furniture, home care systems, and patient data management software. Obviously, if a hurricane causes damage, hospital beds will fill up with more patients after a hurricane.

Another one is Nucor (NYSE: NUE) because there’s going to be rebuilding after an expensive hurricane. Nucor tends to be up after every single hurricane because they provide the steel for any kind of upgrades or rebuilding. Not to mention, they are a good pick right now because of the federal stimulus and infrastructure upgrade.

Damien: I expected companies such as Home Depot (NYSE: HD) or Lowe’s (NYSE: LOW) to make your list. Was there anything you found that kept them from the top three?

James: It’s funny. Whenever I talk about this scan, everybody always says Home Depot. But there were a couple hurricanes which did not benefit Home Depot. So they didn’t make the cut. I stuck with stocks that were up every single time after these hurricanes.

Damien: I like that type of statistical rigor.

James: I tend to be very statistically focused.

Damien: That’s great. Well James, thanks for taking the time to share your top three picks for hurricane season.

James: Anytime. Thanks for having me.