Mother Nature is a tough taskmaster with her destructive whims and wrath. She listens to nobody, but it is possible to profitably invest in companies that help get us back to normal life after her fury.

Hurricane Bertha, which petered out before reaching land, was the first Atlantic hurricane of the season. But odds are it won't be the last troublesome weather of the year. I have built a portfolio of companies that are ready, willing and able to help areas hit by natural disasters rebuild as quickly as possible, plus a few stocks to avoid when nature decides to remind us who is boss.

Obviously, no one hopes for a hurricane to hit our shores, but harsh weather is an unkind fact of life. Thankfully, our society invests in companies that rebuild our communities and infrastructure rapidly. Given the choice, I would banish all hurricanes that bring so much destruction and heartache to those in their path, but I cannot (yet) control nature. However, I can show a playbook to profits that we can donate to help hurricane victims.

The hurricane portfolio is divided into three parts: onshore plays, offshore plays and stocks to avoid or short. All groups have one common trait: providing basic services such as electricity, gas, transport, phone and cable.

Fundamentally, I think the offshore segment is where the most upside lies because they hold better business prospects (translation: less exposure to U.S. consumer). The offshore plays are more levered to the energy sector specifically to the drilling platforms in Gulf of Mexico.

The onshore plays factor in demand (or lack of) from the U.S. consumer, such as the residential housing market which we all know is in a world of hurt. The stocks to avoid consist of situations where the damage will lower their near-term earnings power.

As a quick aside, let me emphasize that most of the plays mentioned in this series are trades for a quick pop, and not part of a long-term portfolio under the destructive-weather thesis. Just as the hurricane damage is often short-term, the pops in these stocks are often short-lived as well. Usually, the action will last for a week or two. At most, the stocks will see a quick burst to results for the next quarter as their products and services are in obvious high demand.

Onshore Plays

Pike Electric ( PEC) and Quanta Services ( PWR): These are my top picks in the onshore segment. Both companies provide infrastructure contracting services to the electric power, gas, telecommunications and cable television industries. After a big storm or flood, these companies are the emergency response team that will be the first on-site to repair down power lines and broken pipes. These are the guys that get the phones working and the lights back on.

Vulcan Materials ( VMC): Produces construction aggregates such as crushed stone, sand and gravel used in nearly all forms of construction. VMC acquired their competitor Florida Rock in February 2007, giving it strong exposure to the Southeast market.

Fleetwood Enterprises ( FLE), Cavco Industries ( CVCO) and Champion Enterprises ( CHB): These mobile-home makers did well in previous post-hurricane trading. But trade with caution, as these are small-cap stocks with low floats and have wild volatility.

Home Depot ( HD): I was hesitant to add this stock to the portfolio, but it tends to get a psychological pop as investors see people scramble to buy gear and supplies at their local Home Depot. This is the least levered to actual needle-moving revenue upside from a storm, simply because of the law of large numbers -- HD posted $77.2 billion in sales in their last fiscal year. But it still may be good for a point or two on investor psychology.

Come back tomorrow for the next installment regarding where I think the big money in the hurricane trade is made: the offshore segment.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Fleetwood Enterprises, Cavco Industries and Champion Enterprises to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
Patrick Schultz is a research associate at TheStreet.com. He has previously obtained securities licenses under the NASD's Series 7, Series 24, Series 52 and Series 63 exams and has worked in the financial markets on various trading desks in addition to trading for his own account. Schultz holds a bachelor's degree in applied economics from Cornell University.

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