Thanks to a ‘Polar Vortex’ of cold air coming down from the North Pole, temperatures have been near records across much of the Midwest and Northeast. Here in Chicago, temperatures with the wind chill approached 50 below zero to start the week, while other cities in the region saw similarly brutal weather.
It also comes following a burst of heavy snowfall which snarled much of both the Midwest and the Northeast, kicking of a particularly unfavorable start to 2014.
Impact
While the weather has hampered many in the transportation industry, and could definitely hit some segments of the food world, not all stocks look to be negatively impacted by the extreme weather. Below, we highlight three companies which have buy ranks and may actually be benefit from increased demand thanks to the wild weather:
Arctic Cat (ACAT)
ACAT had a great 2013 selling a variety of snowmobiles and ATVs to the general public, as its stock appreciated by more than 60% on the year. This Minnesota-based company could also see some solid trading in 2014 too, especially if demand remains robust for its key cold-weather focused products in this snowy weather.
Earnings estimates were already moving higher for ACAT before the storm, suggesting that trends were still moving in the right direction. In fact, all the estimate revisions for the current quarter and the current year have been higher, while EPS growth (yoy) is expected to come in at 72% for next quarter.
ACAT currently has a Zacks Rank #2 (Buy), and its industry is actually ranked in the top 5% too. So even if ACAT doesn’t see a storm boost, this may be a stock to keep your eye on this winter.
Home Depot (HD)
Home Depot is a massive home improvement retailer, and though it has a huge base of operations, the company could see a modest uptick from the weather. That is because demand for a variety of products that HD sells could spike—be it anything from insulation and space heaters to shovels and snow blowers—suggesting more good days could be ahead for this Dow component.
Best of all, the earnings picture was already looking quite good for HD, as estimates were moving almost universally higher for the full year time frame. The consensus was also trending higher for this stock, while earnings misses are pretty rare too.
Thanks to this, HD has a Zacks Rank #2 (Buy), and could see a small increase for its current quarter earnings too, especially if extreme weather stays common this winter.
Columbia Sportswear (COLM)
Although Columbia makes a variety of outdoor apparel products, its coats—with special linings designed to keep the heat in—might see an increase in demand thanks to the extreme cold. The company also sells a variety of other clothing items and accessories, and if the weather stays like this for a while, it could boost demand for COLM’s entire lineup of apparel.
Earnings estimates have also been trending higher for this company, as estimates have risen a little bit for both the current year and the next year time frames. Analysts seem to be in agreement on the firm’s long term prospects too, as not a single estimate has gone lower for the current year or next year periods in the past 60 days.
Though COLM is in a rough industry, the stock has secured a Zacks Rank #2 (Buy). And with the winter weather potentially just getting started—and the Winter Olympics just around the corner—this may be another stock to watch for further gains in the months ahead.
Bonus: First Trust ISE-Revere Natural Gas ETF (FCG)
When temperatures are plunging into near record levels, many people had to turn up the heat and leave it running for quite some time. And when this happens, many utilities have to tap into natural gas as a fuel to meet this extra demand.
Thanks to this, we might see an uptick in natural gas usage that far exceeds normal, leading to a modest increase in prices. While investors can try their luck with the futures market, a play on natural gas producers might be a lower risk play, such as with FCG.
This ETF holds a basket of companies in the natural gas space, focusing on firms in the exploration and production segment. Value metrics, correlation with natural gas prices, and ROE are all used to rank the stocks, and the top 30 are included in the final portfolio and then the fund.
FCG currently has a Zacks ETF Rank #2 (Buy), and could be an interesting pick for investors who are looking for more natural gas demand ahead.
Bottom Line
Weather has been pretty extreme across much of the country, and it has likely led to economic losses in many parts of the nation. However, some companies and sectors do look to benefit from these brutal temperatures and heavy snowfall, and could actually come out ahead.
Plus, the companies—and the ETF—highlighted above all have Zacks Ranks of 2 or better. This suggests that they already were looking quite good before the storms hit, but with the higher demand that may result from the weather, they may see solid days ahead as well.
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