Hurricane Laura to Hurt/Boost These ETF Areas
Hurricane Laura — extremely dangerous category 4 storm — could prove to be the most hazardous storm to hit the Louisiana coast after making landfall. A catastrophic storm and its damaging winds will likely devastate the Louisiana and Texas Border with a threat of lasting rains (which is likely to cause flood) and heavy winds.
About 620,000 people were under mandatory evacuation orders in Louisiana and Texas. As quoted on Reuters, “The storm surge could penetrate inland from between Freeport, Texas, and the mouth of the Mississippi River, and could raise water levels as high as 20 feet in parts of Cameron Parish, Louisiana, the National Hurricane center said.”
Below we highlight a few ETFs and stocks those are likely to win or lose from Laura.
Severe destruction is likely in Louisiana. Insured losses could be more than $15 billion, as per Bloomberg, as quoted on Yahoo Finance. Property and casualty insurance companies may be hit hard as these are likely to shell out handsomely on claims following such catastrophic storms.
Insurance stocks normally fall more than 1% in the month following the disaster caused by a Category 3 storm, per Kensho, as quoted on CNBC. So the impact of Hurricane Laura on insurance stocks is anybody’s guess.
Already, shares of property and casualty homeowners insurance companies like Universal Insurance Holdings Inc. UVE and HCI Group Inc. (HCI) plunged more than 3% on Aug 26. Insurance companies like Chubb Limited (CB) and Allstate Corporation (ALL) are also likely to be hit hard. Naturally, insurance ETFs iShares Dow Jones US Insurance Fund (IAK) and SPDR S&P Insurance ETF (KIE) will feel the pressure (see all Financials ETFs here).
A severe impact from Laura could roil rail and container activity, and crush infrastructure for transportation. Airlines are already suffering from the deadly impact of coronavirus. Now, hurricane Laura would hurt the segment further. Major airlines including United, Southwest, Delta, American and Spirit are issuing fee waivers to let travelers to adjust their flight plans ahead of the storm without any cost. Naturally, transportation ETFs like SPDR S&P Transportation ETF (XTN) and U.S. Global Jets ETF (JETS) may have to bear the brunt ahead.
Restaurants may see considerable sales reduction and destruction due to Laura. Several grocery stores and restaurants were shut due to the hurricane.
Crude oil production in the Gulf of Mexico has been shattered as companies shut down operations. Output cuts are nearing 90%, a level not seen since Hurricane Katrina in 2005, as indicated by Reuters. Selling price of refined oil should see a jump. VanEck Vectors Oil Refiners ETF CRAK should thus gain.
The condition of houses in an area ravaged by a massive storm with 150 mile-per-hour winds can well be imagined. So, home improvement retailers like Home Depot Inc. (HD) (up 2.0% on Aug 26) and Lowe's Companies Inc. LOW (up 2.7%) are in a bright spot. ETFs like Consumer Discretionary Select Sector SPDR Fund XLY and PowerShares Dynamic Building & Construction PKB should also benefit.
The hurricane should shower gains on infrastructure stocks as re-building will push up their demand. So, companies dealing in building materials are likely to see a surge. The Materials Select Sector SPDR Fund XLB has high chances of outperforming.
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Materials Select Sector SPDR ETF (XLB): ETF Research Reports
UNIVERSAL INSURANCE HOLDINGS INC (UVE): Free Stock Analysis Report
U.S. Global Jets ETF (JETS): ETF Research Reports
Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
Invesco Dynamic Building Construction ETF (PKB): ETF Research Reports
SPDR SP Insurance ETF (KIE): ETF Research Reports
VanEck Vectors Oil Refiners ETF (CRAK): ETF Research Reports
SPDR SP Transportation ETF (XTN): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.