Nicholas Irion contributed to this article.In the
Some smaller under-the-radar names to track are Range Resources ( RRC), Stone Energy ( SGY) and Rosetta Resources ( ROSE). Refiners: Valero ( VLO) has the highest refiner asset exposure to storm damage. The company operates refineries in Aruba, Louisiana and Texas, and its two plants in Corpus Christi, Texas are located on the Gulf, as well as its largest production center with over 340,000 barrels per day. Hess ( HES) is an integrated energy company, but has some exposure -- it operates one large refinery in the Caribbean, 550 miles off the coast of Venezuela. Also, integrated names Marathon Oil ( MRO) and Chevron ( CVX) have refinery exposure. Railroads: Flooding is never good for railroads, as damaged tracks are costly to repair and delays revenue generating loads from being delivered. The recent flooding in the Midwest is a good example of the downside. Both Burlington Northern ( BNI) and Union Pacific ( UNP) both reported that severe weather caused its network to experience outages and disruptions to operations. UNP was forced to close six rail lines for several days and was unable to re-route cargo. The company estimates that earnings will be reduced by $0.05 because of the poor weather. Truckers: Continuing on the transportation angle, I think the truckers can be a quick trade as a group to the downside. The group has already been hammered by high fuel prices, so the aftermath of a storm will only add to their troubles. Look for weakness in Con-Way ( CNW), YRC Worldwide ( YRCW), JB Hunt ( JBHT), Landstar ( LSTR) and C.H. Robinson ( CHRW).
Caribbean-based assets: Look for companies with factories or plants based in the tropical islands. For example, Consolidated Water ( CWCO) is a Grand Cayman based water company that processes and supplies water to public utilities and commercial properties such as hotels. It has holdings in the Cayman Islands, Belize and the Bahamas. A strong storm could potentially damage their plants and distribution system. Gaming/Casino: In post-Hurricane Katrina trading, gaming stocks were hit hard and dropped to historically low valuations. Investors speculated that gaming companies with properties in the Southeast and Midwest would have costly rebuilds and revenue shortfalls. The stocks with exposure to the hurricane corridor are Boyd Gaming ( BYD), MGM Mirage ( MGM), Churchill Downs ( CHDN), Ameristar Casino ( ASCA), and Penn National Gaming ( PENN). Of note, the whole gaming sector has sold off hard in the past few months given the current economic turmoil, so the downside is somewhat muted. I would not short this group, but I would avoid it. Finally, one "not obvious" stock to avoid or short is Northrop Grumann ( NOC). The large defense company has significant Gulf Coast exposure from its shipbuilding operations. Hurricane Katrina wreaked havoc with over $1 billion in damages to shipyards with losses severely reducing near-term margins. Again, let me emphasize that this portfolio is for a trade and the furthest from a long-term investment I can think of. But a dollar earned from a fast trade or a dollar earned over a 10-year investment is still a dollar earned.