Seeking Alpha
Long/short equity, special situations, growth at reasonable price, deep value
Profile| Send Message| ()  

The disaster now understood as Superstorm Sandy is wreaking havoc upon the economy and upon most industries, but one industry that keeps finding blessings where others are finding curse, wins again today. The construction industry and building supply companies should find support from what was perhaps the most destabilizing storm in the history of the Northeast.

The shares of the SPDR S&P Homebuilders (XHB) are up another couple percentage points Thursday, after gaining on Wednesday as well. Some $10 billion in property damage is approximated by experts as the result of Hurricane Sandy Frankenstorm. For an industry where new home supply is already scarce due to a long period of inactivity, this means business. Whether the large builders participate or not though, the building supply companies like Builders FirstSource (BLDR), Home Depot (HD), Lowe's (LOW), Beacon Roofing (BECN), USG (USG) and Masco (MAS) should make out big. Certainly, investors are betting on it, with some of these shares up sharply today.

Company & Ticker

Thursday Midday Change

Builders FirstSource

+8%

Home Depot

+1.2%

Lowe's

+1.6%

Beacon Roofing

+0.7%

USG

+2.1%

Masco

+6.2%

Whether a new home is built or not, roofs need repairing, siding needs replacement, water damaged drywall must be removed and replaced, and portions of some homes must be renewed. So the building supply companies are finding capital on the free market today. The low lying fruit has been taken in many of these names, but there are still untapped gains to be found within the sector.

The homebuilders should find a smaller benefit from the disaster, as the complete replacement of homes are going to be limited in number. In actuality, the storm may have caused damage at construction sites, costing some of the companies operating in the Northeast. Also, the work stoppage will cost these companies some capital, and some potential buyers will have been economically impaired. My view is that the impact is less important in this space than in the building supply space. That has not stopped the stocks from rocketing higher today though.

Builder & Ticker

Thursday Midday Change

Toll Brothers (TOL)

+2.1%

PulteGroup (PHM)

+2.9%

D.R. Horton (DHI)

+3.5%

Hovnanian (HOV)

+2.3%

Lennar (LEN)

+2.4%

Beazer (BZH)

+2.6%

Rental space providers should also benefit from the storm, as displaced and economically hampered Americans must move somewhere. The easiest option for the displaced, after friends and relatives, are the apartment rentals. This is probably why the shares of many apartment rental REITs are higher today. The shares of Apartment Investment & Management (AIV), Equity Residential (EQR) and Avalonbay Communities (AVB) are higher by 0.7% each. Take note that all the players are not rising, as regional plays gather capital allocation from capital previously allocated to names in other regions.

So, even as airlines, retailers and many other discretionary capital destinations suffer today and over the next quarter, some are finding a blessing for their shares. It just goes to show you that even in disaster, opportunity can be found.

Source: One Company's Disaster Is Another's Blessing