As Irma Bears Down, Will Rebuilding Stocks Rise Up?

Last week, I wrote about Hurricane Harvey. I suggested investors could “do well by doing good” by investing in companies whose products will help fuel the rebuilding and recovery process in Texas and Louisiana.

Little did I know that a week later, it would be me and my fellow Floridians under the gun. Hurricane Irma is bearing down, and I’m taking all necessary precautions to keep my family and my home safe. Just like in 2004 and 2005, when South Florida was struck by multiple storms, our company also has clear, comprehensive contingency plans in place.

I’m hoping for the best. But I fully recognize that depending on where the storm strikes and how strong it is at landfall, another massive rebuilding effort could soon be underway.

If there’s one major difference between Irma and Harvey, it’s that wind rather than flooding may be a major contributor to the overall damage tally. That means state-backed insurers like Florida’s Citizens Property Insurance Company (Rated “A+”) and private insurers — rather than the federal National Flood Insurance Program (NFIP) my colleague Gavin Magor wrote about — could be the ones writing big checks in coming months.

Citizens was the fourth-largest homeowner’s insurer in Florida last year, with $428.7 million in premiums and 4.89% of Florida’s market share. Universal P&C Insurance Co (Rated “D”), the largest homeowner’s insurer in the state, had $781.5 million in premiums with 8.9% market share. State Farm Florida Ins Co. (Rated “B”) was second-biggest, with $581.4 million and 6.6% of the market, while Federated National Ins. Co. (Rated “C”) was third, writing $430 million in premiums and representing 4.91% of Florida’s market.

So once again, I recommend you do the following:

1. Check out our November 2016 column on infrastructure-focused mutual funds … my January 2017 piece on construction and engineering stocks … and my May 2017 article on industrial and infrastructure ETFs for more background information.

2. Comb through the Weiss Ratings Screeners of leading sector ETFs and stocks specializing in those sectors that we put together.

3. You may also want to look at companies like Home Depot (HD, Rated “B+”) and Lowe’s (LOW, Rated “B”) as they could buck the overall negative trend in the retail sector that I’ve written about before.

4. Finally, I’d keep an eye on mutual funds like the Fidelity Select Insurance Portfolio (FSPCX, Rated “B”), as well as the three major ETFs that track U.S. insurers via this Insurance ETF Screener I created.

The largest screener component is the SPDR S&P Insurance ETF (KIE, Rated “B-”), with $919 million in assets. It holds a wide variety of property and casualty, title, auto, life, and multiline insurers, and it was performing well until August. But potentially large storm-related losses could accelerate and deepen the recent pullback we’ve seen.

Again, we’re a resilient country and we’ll come together to rebuild from both of these storms should Irma strike. Stay safe if you’re in the path of this new one, and if you’re an investor elsewhere, keep my “Doing well by doing good” plan of action in mind!

Until next time,

Mike

P.S. If you would also like to donate to the Harvey relief efforts, there are many ways you can do so. This ABC News story gives you several options, and this New York Times story lists several others.