We're still in the confusion phase of reacting to Hurricane Katrina. But we do know this: All of the economic numbers we see for the next several months, no matter how they get adjusted, are going to be wildly off what we expect, from GDP to inflation numbers, oil inventory to employment and income. We're not going to see the numbers we are familiar or comfortable with, so they won't be easy to interpret.
For this reason, I'm mining past data for clues to how to make money in this environment. Last week, I took a look at all of the current S&P 1500 stocks and how they reacted after each of the costliest hurricanes ever: Hugo, Andrew, Ivan, Floyd, Fran and Opal. Specifically, I looked at what would happen if you bought each stock at the end of the month in which the hurricane had its effect (in the case of Katrina, I'm assuming a buy at the end of September) and held for three months.
I then looked only at those stocks that were up three months later in all six instances. Last week, I analyzed Andrew (ANDW - commentary - Cramer's Take) and Hillenbrand (HB - commentary - Cramer's Take) (rebuilding cell phone towers and making hospital beds, respectively). This week, I'll lay out the case for Campbell Soup (CPB - commentary - Cramer's Take) and Toro Industries (TTC - commentary - Cramer's Take).
Campbell Soup
Campbell Soup was up 25%, 23%, 20%, 15%, 4.36% and 0.03%, respectively, three months after each of the last six costliest hurricanes. Campbell, of course, makes canned soup. But it also makes many other convenience products, such as canned pastas and gravies, juices, breads, crackers, frozen products, etc. Because of its broad array of shelf-stable foods, three hurricane-season effects boost Campbell sales:
Before a hurricane, consumers stockpile food such as canned goods.
Immediately after a hurricane, canned goods and other packaged foods are sent to the afflicted regions.
During the latter half of hurricane season, the fall months, consumers start purchasing more canned soups, because soup is considered a winter product.
The negative effect of hurricanes on Campbell is that during a hurricane, people (obviously) are not shopping. For example, Wal-Mart stores and grocers were closed. In fact, over the past three months, Campbell has underperformed the S&P 500, and it fell sharply during the hurricane. But it has since regained some ground.
Nick Godt Another Pox on the Housing Sector 9/20/2005 1:15 PM EDT Ahead of the FOMC meeting, there's more evidence Alan Greenspan was right to be worried about real estate.
Richard Suttmeier Still Value in Some Semis 9/20/2005 2:22 PM EDT The sector remains undervalued, but some of the group's momentum stocks may be losing steam.
Melissa Davis Tenet Facing a Big Tab From Storm 9/20/2005 1:36 PM EDT Flood damage could be extensive and uncovered. But the company does cure a default.
James Altucher RealMoney's Blog Watch 9/17/2005 8:00 AM EDT James Altucher looks at what the financial blog world offered over the past week.
James Altucher Four Lessons From MSN/AOL Talks 9/16/2005 1:40 PM EDT Executives at Microsoft and Time Warner have learned the hard way from their love/hate relationship.
James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of Trade Like a Hedge Fund and Trade Like Warren Buffett. At the time of publication, neither Altucher nor his fund had a position in any of the securities mentioned in this column, although positions may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback; click here to send him an email.
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