On Monday, investors focused on higher energy prices and insurance-company payouts in the wake of Hurricane Katrina. But as time marches on, attention will shift to rebuilding, the risks that hedge-fund and pension-fund investors took in buying supposedly low-risk "catastrophe" bonds and the effect of the storm on the fragile U.S. economy.

While the near-term result of natural disasters is naturally negative, they very often lead to infrastructure investments that end up looking like a net positive for their regions. Homes, roads, offices and industrial complexes need to be rebuilt, and the government usually provides tax relief, or outright grants, to pave the way.

Investors will be scouring the horizon this week for companies that will see benefit from the natural disaster. It may seem craven, but this is just capitalism's way of allocating financial resources at a critical time to the companies that need it from the sources that have it. Call it Katrina's invisible hand.

An example might be Beacon Roofing Supply ( BECN - Get Report), which doesn't operate branches in the area but may see its revenue and earnings move up anyway.

A Morgan Keegan analyst notes that the storm's destructive winds have torn a lot of roofs off structures. Shelter Distribution, a major distributor being acquired by Beacon, operates two locations in the greater New Orleans area. The analyst said he believes Katrina could potentially push 2006 income at Beacon up by 20 cents to 25 cents a share.

Not Just Any Port in This Storm

Everyone immediately worries about the loss of life in a city the size of New Orleans, and economic minds immediately dwell on the loss of Gulf of Mexico oil production. But the area is also home to the Port of South Louisiana -- the fifth-largest port in the world and the largest port in the U.S. Yes, it's bigger than New York-New Jersey, bigger than Los Angeles-Long Beach and bigger than Houston. You have to go to Hong Kong, Shanghai, Rotterdam and Singapore to find ports that handle more tonnage.

Something like 15% of all U.S. exports ship through the southern Louisiana port, including much of our Midwestern corn, soybeans, wheat and animal feed. Add crude oil from the Gulf, steel from the Appalachians, iron ore from the northern plains, and fertilizer, gasoline and petrochemicals from area refineries, and you can begin to understand the profound importance of the area to American commerce.

If Katrina causes the port to become unusable, or if it causes the Mississippi to shift significantly at a time when harvests are coming in, we may see an important boost in world agricultural prices. The reaction could be delayed, but watch for moves in soybean giant Bunge ( BG - Get Report).

Katrina's rain could bring long-needed refreshment to Midwestern crops, which would dampen prices. But if there's too much rain and croplands flood, or if the crops can't get to the port, then supply would be diminished and prices will rise.

At the same time, the impairment of the port could hamper the supply of ships on the water, boosting spot prices for shipping. If so, look for upward moves in the shares of dry-bulk shippers such as Excel Maritime Carriers ( EXM), DryShips ( DRYS) and Diana Shipping ( DSX).

Turning the Lights Back On

Power is always a big concern in the wake of a hurricane. One of Florida's major utilities, FPL Group ( FPL), moved from $32.50 to $42.50 in the year following the 2004 hurricanes. Utilities suffer damage to towers and transmission lines initially, but that's covered by insurance, and ultimately they tend to get post-disaster rate hikes from regulators, boosting earnings much farther out.

The biggest electric utility in New Orleans is Entergy ( ETR - Get Report). It pays a dividend yielding 2.8%, and even though it's trading near an all-time high, it may still be a decent value. The energy-savvy brokerage Jefferies put out an interesting report on the efficiency of the company's nuclear power plants last week, upgrading its opinion to buy from hold. Jefferies found that a sum-of-the-parts valuation put the utility's fair value at $87.50 in 12 months, which would be a 16% gain from here, including the dividend.

For those who may wish to start thinking more locally, very often regional banks and savings and loans, which make loans on new local investments, do well following big storms, as do building materials suppliers. Again, there's something of a delay before a revaluation kicks in. Two regional banks with positive fundamentals and technicals that are based in Louisiana are Whitney Holding ( WTNY) and Iberia Bank ( IBKC - Get Report).

After the big hurricanes in Florida last August, a few of the major mobile-home manufacturers did well as merchandise was ordered for temporary housing. Fleetwood ( FLE) went from $10.60 to $15.50 in a few weeks even though its chart at the start looked dreadful (and strangely enough, much like it does now). Another company in the sector is manufactured-housing specialist Champion Enterprises ( CHB), whose shares have likewise been in the doldrums. Shares moved up 30% after the Florida storms last year.

Of course, nonmanufactured housing also tends to get a big boost following hurricanes, as we saw with Florida-based resort builder Bluegreen ( BXG) and homebuilder Technical Olympic ( TOA) last year.

The safer bet, if there is such a thing, may be the homebuilders' suppliers. These include timber providers such as Rayonier ( RYN), which happens also to pay a nice 4% dividend; concrete and cement providers such as Florida Rock Industries ( FRK), which yields 1.2%; and fast-growing distributors such as Building Materials Holding ( BMHC). All have operations in the area, and you can bet their salesmen will be making calls once the wind stops howling.

The Mississippi River can get seriously messed up in a big storm, and when the clouds clear, engineers may discover that bridges, freeway overpasses and other major pieces of roadway infrastructure must be retrofitted or replaced. A major bridge builder serving the Southeast is small-cap Michael Baker ( BKR), which is based in Pittsburgh.

The company also has the advantage of being a big player in the building and reconstruction of oil-drilling platforms (not to mention the rebuilding of Iraq). Among the much-larger companies that undoubtedly will have a hand in the reconstruction effort will be engineering-services provider Fluor ( FLR - Get Report) and mid-cap construction contractor Jacobs Engineering ( JEC).

Smaller but still-mighty companies to consider for their ability to either rebuild oil-drilling platforms or roadways are Louisiana-based Global Industries ( GLBL) and Foster-Wheeler ( FWLT); for underground reconstruction of fiber-optic lines or electrical power, one of the area's powerhouses is Florida-based construction-services provider MasTec ( MTZ).

When Paying Billions Isn't All Bad

One of the most misunderstood aspects of post-disaster reconstruction is the role of insurance and reinsurance companies. At first blush, it always looks as if they get hit hard as investors fret over the losses -- estimated as high as $25 billion with Katrina -- they will be forced to take. But later, these stocks are usually revalued upward as they exploit the situation to raise rates.

If it's too scary to consider an insurer, consider the area's largest insurance brokerage instead, which is the very resilient Florida-based firm Brown & Brown ( BRO - Get Report). Brown & Brown shares haven't suffered a single negative year in the past 11. So far this year the stock is up only 6.8%, which is below its average of returns in the high teens to low 20s. However, earnings this year are on its usual track of growth in the midteens.

As for those crazy catastrophe bonds, here's the deal. Sometimes companies with potentially major exposure to devastating events such as hurricanes or earthquakes prefer to sell bonds to public investors rather than to buy insurance. These securities, called "cat bonds" for short, pay yields like junk bonds and very rarely result in major payouts, and thus they have become popular among hedge and pension funds who often leverage their bets by buying them with lots of borrowed money.

Now here's the catch: If a specific underwritten catastrophe meets a certain loss threshold, such as $10 billion, then the bond issuer doesn't have to pay back the principal or any more payments. Of course, that's incredibly bad news for the bondholder.

We won't know whether any of these bonds will blow up on funds for a few days or weeks, but it's an issue that bears watching, for it could result in a flood of another type -- red ink - for owners such as the investment arms of major industrial companies or banks.

At the time of publication, Markman was long Florida Rock Industries, although positions may change at any time.

Jon Markman, writer of TheStreet.com Value Investor, is the senior investment strategist and portfolio manager at Greenbook Investment Management, a division of Greenbook Financial Services. Separately, he is publisher of StockTactics Advisor, an independent weekly investment research service. While Markman cannot provide personalized investment advice or recommendations, he appreciates your feedback; click here to send him an email.

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