Will Irene Propel These Stocks?

While I don't advocate making investment decisions based on short-term conditions, the reality is that in the short-run, stocks will react to short-term events. This past week, the stock market experienced an up week for the first time in four weeks in anticipation of Fed Chairman Bernanke's comments that would suggest further stimulus if needed. The other headline-making story was the arrival of Hurricane Irene to the U.S. East Coast and what that means for households and businesses.

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Time to Stock up
When faced with a natural disaster, consumers rightly prepare for the worst. They start stocking up on basic supplies in anticipation of the worst. Batteries are a very common item for obvious reasons. Energizer Holdings (NYSE:ENR) is one of biggest producers of batteries. Coincidentally, ENR is actually a high quality company. Shares trade at $75 or 12 times forward earnings. In addition to batteries, ENR makes other consumer products like shaving razors, skin care products, and baby care products. Aside from the flagship company brand, other brands include Schick, Playtex, Hawaiian Tropic and Diaper Genie.

And where do consumers go to buy batteries, flashlights and generators? The biggest game in town is Home Depot (NYSE:HD) which last week reported that consumers were flocking to the stores to stock up on such items. Unfortunately, a strong housing market is the tailwind Home Depot needs, but a nice jolt doesn't hurt. Shares today yield a nice 2.9% and trade for 15 times earnings.

Fixing the Damage
A nasty arrival when the storm hits the coast could cause significant structural damage to infrastructure and real estate. Even though most of the costs would be borne by insurance companies, the damage will still benefit certain businesses. Builders FirstSource (Nasdaq:BLDR) is a leading supplier of residential building products with a strong presence in the eastern part of the U.S. The company primarily serves homebuilders but it has recently started to focus on repair and replacement items like windows and doors. Shares trade for around $2, near a 52-week low. Gibraltar Industries (Nasdaq:ROCK) is another leading supplier of building products based out of New York. The company's offering included roofing products, gutters and mailboxes - areas easily damaged by storms. Like most building material related products, shares are at a low due to current lack of profitability. Shares trade for $8.50 against book value of $15.20 per share.

The Bottom Line
Such a short-term jolt to business, if any, is not what you want to anchor your investment decision on. Many of these company's do hundreds of millions, if not billions, of dollars in annual sales. Unless Irene delivers a really negative surprise, the increase in consumer traffic will likely have no effect on EPS figures. Nonetheless, market watchers may think there is a short-term trade here. Buyer beware. (For additional reading, check out Mastering Short-Term Trading.)

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