Insurers Tremble with Florence on the Move


Hurricane season has begun, and insurers are trembling.

Florence is expected to hit the Carolinas on Friday. It’s already a category 4 hurricane, which makes it unusually powerful for a storm moving that far north.

Property and casualty (“P&C”) insurers like Hartford (HIG), Allstate (ALL), Progressive (PGR), Travelers (TRV) and Chubb (CB) are the names to watch as the tempest draws near.  Smaller reinsurance stocks like Everest (RE), which backstop the consumer-facing firms, will also be viewed as vulnerable to the storm.

Historically, the P&C stocks tend to climb in October, after the storms pass. But despite the obvious link to weather, this group isn’t usually terrific for active traders because of their complexity. Besides, even the biggest names average less than 3,000 options contracts per day. How fun is that?

Fortunately, there are more liquid areas to watch.

Home Depot (HD) and Lowe’s (LOW) will be viewed as beneficiaries to the cleanup. Generator provider Generac (GNRC) is also on the list. All three stocks closed at new 52-week highs yesterday.

Home Depot (HD) chart showing highs and 50-day moving average.

Automakers have also gotten a boost in the past. After all, homeowner policies only cover wind damage and exclude floods. But car insurance covers against both. Will Florence ruin enough vehicles to break the one-way selloff in General Motors (GM) and Ford Motor (F)?

In conclusion, hurricanes are major news events impacting millions of people. Hopefully this post will help you anticipate some of the ways investors will react.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.