Hedge Your Portfolio with Hurricane Stocks

Includes: CLH, DBE, MTRX, SRCL
by: Matthew D. McCall

With Hurricane Gustav closing in on the Gulf of Mexico and expected to make landfall as a major hurricane, it is time to hedge your investment portfolio. After analyzing the 2008 hurricane season, I have generated a pack of hurricane stocks heading into Labor Day weekend.

Matrix Services (NASDAQ:MTRX) - The abundance of oil & gas installations in the Gulf region is a major concern for the industry and investors. One of the companies that can help repair the damaged facilities after a natural disaster is MTRX. After Hurricane Katrina, MTRX was called upon by Chevron (NYSE:CVX) to repair their terminal facility in Louisiana after it suffered heavy damage from the storm. The company calls many of the major energy companies their customers and will be one of the first called upon when disaster strikes. Technically if the stock can break above $25 it would signal a new breakout on the chart.

Clean Harbors (CLHB) - After Hurricane Katrina the company was called upon to help clean up New Orleans and the surrounding area. The company aided in recovering over 60,000 total hazardous items during their work in the wetlands of Louisiana in 2005. Considering that Katrina triggered over 575 chemical and oil spills in the region along with water and mold damage, it was imperative to have the cleanup process started immediately. Other projects CLHB helped with after Katrina included an oil facility owned by Murphy Oil (NYSE:MUR) and the US postal service offices. The chart of this stock clearly shows it is not just a hurricane play; with a gain of over 50% in 2008, CLHB has been a big winner.

Stericycle (NASDAQ:SRCL) - The stock is one of the leading medical waste companies in the US, serving over 350,000 customers. Typically SRCL would not be considered a play on hurricane cleanup, however considering that medical facilities are often in the path of the storm, their services are in demand. After Katrina hit in 2005, the company was called upon with 72 hours after the storm hit to service the hospitals in New Orleans. The destruction led to hazardous medical waste that had to be contained and destroyed. The recent activity on SRCL has been volatile after a multi-year uptrend. However, it remains a leader in its niche sector and reported 20% revenue growth last quarter.

PowerShares DB Energy ETF (NYSEARCA:DBE) - On anticipation of a possible hurricane in the Gulf region, the energy futures have been rising. Both oil and natural gas have seen a bid higher, but oil seems to garner more attention than its peers. When investing in the energy futures it is much easier for an investor to use an ETF that offers a basket of commodities. In order to lower the risk of investing in one commodity I have chosen to go with DBE, which invests in 5 energy futures contracts. Brent crude, heating oil, RBOB gasoline, and light crude each make up 22.5% of the ETF and natural gas is 10%. Because natural gas may be the big mover during a hurricane you may prefer the US Natural Gas ETF (NYSEARCA:UNG). However, keep in mind the risk is much higher.

Disclosure: none