Risky Business: 3 Companies That Profit From Natural Disasters
In the wake of the devastation caused by Hurricane Dorian, we look at 3 companies who actually see sales increase in the event of a natural disaster.
In the wake of the devastation left by Hurricane Dorian, several Carribean islands as well as southern states of the U.S. will have to begin a rebuilding process, at huge cost. Infrastructure, housing and transport will all need to be rebuilt, but where exactly does this come from?
We take a look at 3 businesses who actively play a role in disaster preparation and relief, and often see a spike in profits during the hurricane seasons and in the event of natural disasters.
A significant chunk of the profits for Home Depot (NYSE: HD) come in the build-up to a hurricane or disaster, as investors bank on the psychological response of the public to reports of a possible impending devastation.
It is a natural reaction, that when a person hears of an impending disaster, they will stock up on whatever supplies they need to protect, and if necessary, repair their home, especially before all of these supplies run out. Home Depot even run emergency command centers dedicated to natural disaster responses, most recently in regards to Hurricane Dorian.
With 150 stores in the path of Dorian, Home Depot enlisted 200 staff at its command center, dedicated to keeping customers in these affected areas happy by maintaining supply chains, operations, human resources and merchandise.
As one of the largest home improvement retailers in the world, Home Depot have managed to build and maintain a strong following in the event of disasters, as it has heavily contributed to relief efforts via collaborations with organizations such as American Red Cross. In the lead up to storm season, Home Depot may just be worth the investment.
Another company which thrives on the psychological impact of natural disasters is U.S. based Walmart Inc (NYSE: WMT). The company behind the wealthiest family in the world also experiences spikes in its sales as well as stock in the build up to a disaster, and sometimes in its wake.
Walmart often see a spike in sales, even when a weather event does not have a significant impact on the locale. The massive retailer has a reputation for selling just about anything and everything, so when a storm is forecast, people preemptively purchase products such as batteries, shovels, rations, generators and more, just to avoid and potential shortages.
The company has also reportedly been compiling predictive data since 2004 in order to best target customers with ‘disaster-season’ products. "Strawberry Pop-Tarts increase in sales, like seven times their normal sales rate, ahead of a hurricane. And the pre-hurricane top-selling item was beer," Linda M. Dillman, former chief information officer for Walmart, told the Times.
However, Walmart is not without a philanthropic side! Back in 2017, a Walmart spokesperson reported that the company was rethinking disaster relief based on the data it had at its disposal to always have essentials such as rations and building supplies on-hand. Following Hurricane Dorian, Walmart also pledged $500,000 in cash and donations for relief and recovery.
A final company that accommodates a very niche need during disaster season is Generac Holdings (NYSE: GNRC), who manufacture and sell power generators.
In 2017, the United States and Carribean were battered with successive hurricanes, which caused severe damage and power outages. These storms seemed to jolt people into the realization that they could not rely on local power suppliers, and so Generac enjoyed one of its most successful quarters. Sales jumped more than 22% to $457.3 million, which was a new record and was far greater than the $420 million that most of those following the stock were looking to see.
Fast forward to 2018 and sales leading up to the storm season have increased again as people want to be more prepared than they were the year before. It is not just homes, but businesses also provide significant income for Generac, as they purchase its large wattage generators to power stores or supermarkets during adverse weather conditions.
During Hurricane Florence that year, Generac deployed advanced storm teams who had the tools and skills to repair and install generators in the midst of the disasters, helping enhance public image and build trust in Generac’s product. In such weather battered parts of the world as the Carribean and South-East United States, generators have quickly become an everyday item.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Home Depot and Walmart. Read our full disclosure policy here.