Logic dictates that when a hurricane is coming, survival is key. This means that sensible people will haul their pickup trucks down to the nearest Walmart (NYSE:WMT) and load it up with water, duct tape, canned food, flashlights, and batteries.
That's good for Joe Citizen and Joe the Plumber. But what about Joe the Finance guy? The right answer isn't to buy actual survival supplies. It is to buy theoretical survival supplies, a la Walmart stock. Assuming a hurricane is coming and will wreak havoc on real businesses, infrastructure, homes, shops, streets, and lives, then it will wreak havoc on the stock market as well. No, not the actual New York Stock Exchange located on 11 Wall Street in downtown Manhattan. The theoretical stock exchange, located on each of our computers, brokerage servers, and Jim Cramer's Mad Money, where important people make important decisions, causing effects that seem to be greater than actual hurricanes.
Regardless, Walmart is generally the du jour stock pick when natural disaster awaits. Let's see if it really works.
Below are the last major hurricanes to cause significant damage in the US. Adjacent to each hurricane is the date at which each hurricane formed until it dissipated. The three successive stock prices listed reflect WMT's share price: 1) 1 week before the hurricane 2) When the hurricane began 3) When the hurricane dissipated. There is a plus/minus 3 days on the dates of the listed share prices, depending on the day of the week (exact dates could be not be retrieved for each price)
2012- Isaac: August 21- September 1, 74.01, 71.43, 72.60
2011- Irene: August 21-28, 49.78, 52.30, 52.90
2008- Ike: September 1-14, 59.07, 60.74, 62.41
2008- Gustav: August 25- September 4th 59.37, 59.44, 60.74
2005- Wilma: October 15-26 44.03, 45.72, 45.50
2005- Rita: September 18-25 43.87, 43.20, 43.82
With the exception of Hurricane Rita, Walmart does seem like a safe bet for investors, though for small cap investors such as myself, the gain seems to be rather negligible. So much for theoretical survival.
A more attractive stock might be Generac Holdings (NYSE:GNRC), which sells generators- something which plenty of people would pick up before a major hurricane. Though the hurricane is likely already priced in, as GNRC has already gained 10% in the last week.
Regardless of what one buys, bottles of water or shares in Walmart, there is going to be damage somewhere. And with the potential that the hurricane could trigger a down market, Walmart seems to be a safe haven, at the very least.