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Investment Opportunities

Winter Weather Investments: Stocks that Rise as Temperatures Fall

I’m writing this article wearing a few different layers of clothing. It’s freezing here in Baltimore, and our office’s heating system is playing catch-up. Winter weather has arrived—and with it come some great investment opportunities.

At one time, winter weather investing was all about heating oil futures. But nowadays, that play is too popular to be profitable. Seasonal demand gets priced in long before the weather gets icy. And the declining popularity of oil heaters hasn’t helped.

So below, we’re looking at some unconventional winter weather plays. Like heating oil, all of these companies are uniquely positioned to make their money when the weather outside is frightful.

Plows

People have places to be. Even when it snows.

That’s why the plowing industry is so important. They allow businesses, residences and institutions to keep their sidewalks and parking lots free of ice and snow.

What’s more, there’s really nothing to plow during the warm months. That makes plowing stocks something of a “pure play” on winter weather.

It’s apparent in this graph of Douglas Dynamics (NYSE: PLOW). They’re one of the oldest and largest plowing firms in the country. Since the 50s, they’ve been selling and re-fitting plow equipment for icy roads across the USA. And their stock price jumps up every year as soon as the weather starts to turn.

winter weather

Salt

Unfortunately, some winter weather is a little harder to handle than snow. When roads and sidewalks freeze over, plows alone don’t suffice. De-icing public thoroughfares requires some chemical weaponry.

Road salt is another product which is critically important in the winter, and basically useless for the rest of the year. Unfortunately, however, it’s not easy to find a road salt “pure play.” Most salt manufacturers are diversified chemical companies, and they have other revenue streams for the warm months.

One exception is Compass Minerals (NYSE: CMP). They focus on two things: salt and plant nutrition. And as you can see from the graph below, their stock price spikes at two times of the year: winter and planting season.

winter weather 2

Generators

The inconveniences caused by winter weather don’t end with road travel. Snowy and icy winters can also put a strain on important infrastructure—including power grids.

That’s why the backup generator industry follows a seasonal pattern in its equity performance. In especially snowy parts of the country like New England and the Midwest, folks can’t count on their power supply during blizzards. So they have to make their own.

Generac (NYSE: GNRC) is a particularly good play on this phenomenon. The almost 50-year-old company is based in snowy Milwaukee, Wisconsin, though it serves the entire country. And as you can see, its stock has steadily risen in recent months.

winter weather

All of these companies help make our busy lifestyles possible in times of extreme winter weather. By investing in them, you’re investing in your community’s preparedness for ice and snow.

2017 is projected to have a very snowy start, so this should be an especially profitable year for winter weather industries. By picking up some snow and ice stocks now, you might make yourself a little more money to start the New Year right.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official position of Wall Street analysts.


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