Prep Your Portfolio for Disasters with These Stocks
There are natural disasters such as Super Storm Sandy, and most recently winter storm Nemo. Then there are man-made disasters such as the proposed curtailment of Second Amendment rights, higher taxes on all productive Americans, and the debasing of our currency by the Federal Reserve.
Then there’s the real disaster that is the ever-expanding leviathan state, where politicians impose more and more controls and levies on society in the name of the “public good,” and at the expense of those who actually create the wealth and produce the good that all of us benefit from.
Now, when it comes to natural disasters, there isn’t much we can do about Mother Nature. There is, however, a way for smart investors to make sure they gain a little portfolio alpha from Mother Nature’s wrath, and that is by investing in companies designed to help us all get through devastation that this unpredictable maiden throws our way.
One of the consequences of big storms such as Sandy and Nemo is widespread power outages. The power grid works well, for the most part, under normal conditions. However, when the grid gets compromised, you’re basically out of luck—unless you have a back-up generator from Generac Holdings (GNRC). The company makes a variety of high-quality residential and industrial generators designed to work when the power grid fails. The company’s stock has seen a power surge over the past six months, surging more than 82% as investors bet on the boom times in this disaster-proofing company.
Another company that supplies the goods that allow us to ride out the storms is Home Depot (HD). The retail powerhouse sells all sorts of things needed to board up your home, clear the snow from your property, and fix your house after the damage is done. So, while you can’t fool Mother Nature, at least you can profit from her bad mood with stocks like Generac and Home Depot.
As for the man-made disasters, here too there are companies providing products that shelter you from bad governmental policy.
The recent push to ban so-called “assault weapons” has caused Americans to pile into gun shops to buy firearms made by Smith & Wesson (SWHC) and Sturm, Ruger (RGR). These two publicly traded companies are likely to keep doing well even if a ban on weapons is imposed, because both sell a variety of home-defense oriented firearms that wouldn’t be subject to the current proposal to ban military-style weapons. Also likely to benefit from any new laws is gun retailer and outdoor superstore Cabela’s (CAB), which is one of the biggest firearm and ammunition sellers in the country.
Higher taxes represent a big drain on nearly every American, and the increased burden from higher payroll taxes, new ObamaCare taxes and the increase on the so-called rich will likely find there way to consumer-oriented companies that sell products domestically. Yet, while there may be stymied economic activity in the U.S. due to burdensome government, many of the world’s emerging markets and Asian economies still are looking at big growth going forward.
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ETFs and gold
Many of these countries actually have more economic freedom than we do here in the U.S., and many emerging market countries have proven to be far better environments for building stock market wealth. One exchange-traded fund (ETF) that investors can use to blunt the disaster of more government here at home is the iShares MSCI Emerging Markets Index (EEM), a basket of some of the biggest and best stocks trading on the emerging market indices.
Finally, the currency debasing policies of the Federal Reserve, as well as central banks around the world, have planted the seeds for massive asset price inflation—inflation that will eventually bloom into a disastrous hit on your money. Investors who want to avert this disaster will want to own hard assets such as gold and silver, as the value of these and other precious metals will increase as the value of fiat currency decreases.
Funds such as the SPDR Gold Trust (GLD) and the iShares Silver Trust (SLV) represent a great hedge against the vogue policy of keeping the dollar down, a policy destined to be a man-made disaster for those unwilling to take action now to prepare for the coming currency storm.