Before a hurricane like the recent Hurricane Idalia makes landfall, consumers typically pick up flashlights, batteries and plywood from chains like Home Depot and Lowe’s or try to buy a generator from Generac. But behind the scenes, there are a variety of companies that benefit from cleanup and reconstruction efforts after natural disasters. This year’s Atlantic hurricane season is going above average compared to previous years, with 14 storms, four hurricanes and three major hurricanes so far. Hurricane Lee, which was a Category 1 hurricane as of Friday morning, was increasing in size this week as it headed toward New England and Canada. As climate change fuels extreme weather events, the number of multi-billion dollar disasters is also increasing, with some companies benefiting more than others. In 2022, the US experienced 18 weather and climate disasters, each costing at least $1 billion. “The frequency of extreme hurricanes appears to be becoming more regular,” said Andrew Chanin, who has managed the Procure Disaster Recovery Strategy ETF since it opened in June 2022. Investors and individuals are wondering whether they are doing enough to prepare. The exchange-traded fund, with just $2.2 million in assets, tracks companies that help mitigate or recover from natural disasters like hurricanes, wildfires, floods or earthquakes, and is up nearly 19% this year – better than the S&P 500 16.2% gain. The companies in its portfolio tend to benefit from extreme weather events. Some of these can be quite obscure. FIXT YTD Mountain Procure Disaster Recovery Strategy ETF in 2023 Under the radar, stocks like Houston-based Sterling Infrastructure and AtkinsRéalis, formerly SNC-Lavalin Group, a Canadian engineering and construction company, stand to benefit from these disasters. Both are among Chanin’s largest holdings, according to Morningstar. Sterling Infrastructure shares are up 125% in 2023, rising for the fifth consecutive year, increasing its market value to $2.3 billion. The few analysts covering the infrastructure services provider give it an average overweight rating with a price target of $87, implying further 18% upside potential next year, according to FactSet. Sterling beat analysts’ estimates when it reported second-quarter results in August, reporting 13% revenue growth; 30% higher EBITDA; Expansion in each of its business areas, e-infrastructure, transportation and building solutions; and increased profit and sales forecast. AtkinsRéalis is another big winner, up 84% this year. The recently renamed company, which last month forecast organic sales growth of up to 15% this year, is planning acquisitions in the Northeast and Northwest U.S. starting next year, according to Bloomberg. AtkinsRéalis’s average analyst rating is Overweight and the price target implies an upside potential of around 9%. “About a third of the total financial burden from natural disasters occurs in the United States… to the extent that they can increase their footprint… that could be a way to get more access to different contracts,” Chanin said. Another ETF holding is Sulzer, a Swiss industrial and manufacturing company. According to FactSet, the fluid power and chemical processing company has gained 30% this year, has a median rating of Overweight, and has a price target that implies additional upside of 10%. Great Lakes Dredge & Dock and Clean Harbors are other companies Chanin cited as strong names in disaster recovery. Many analysts believe the most likely beneficiaries remain the big retailers that Americans typically use to prepare for a disaster. Citigroup researchers point to chains such as Lowe’s, Tractor Supply, Home Depot and Floor & Decor Holdings.
Source : www.cnbc.com