Hot Stocks for this Hot Weather
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Okay so by now you have probably already felt first hand this seemingly unrelenting hot weather. Studies indicate that last month was the hottest June recorded. So are there trades to take advantage of this hot weather?
What about beverages? You get thirsty in the heat don’t ya?
Certainly beverages come to mind; especially beer (even though one shouldn’t be consuming alcohol during periods of severe heat). But Budweiser [BUD], Boston Beer Company (maker of Sam Adams) [SAM] and the similar breweries have already made new 52-week highs or are hovering close there so while there may be a little more upside there, I’d like to look elsewhere instead.
Darn, well okay… hmmm if it’s hot what do you do? Why, of course, you turn on the AC!
So what’s the air conditioner trade? I thought about going to the core of the Air Conditioner unit… perhaps a company that manufacturers Freon? Okay, so actually it turns out Freon is DuPont’s [DD] brand name for CFCs, the organic compound used by many AC units . Unfortunately, this article is now a month late (sorry I have been busy) and Dupont’s stock has also risen to near 52-week highs.
Well then what about the people who sell those AC units?
Ah okay, so Home Depot [HD] has potential. There’s the AC demand story, but there’s also all the loan modifications/loan extensions taking place for distressed borrowers that is helping homeowners avert foreclosure and stay in their homes. Whether or not you agree with the assistance is another subject for debate and the opinions on both sides have been strong no doubt. Perhaps another article for that… In the meantime, Home Depot is set to announce earnings on August 16th and if AC sales have been unusually high these past few weeks then I think Home Depot will deliver a strong number. Also because of the aforementioned assistance to distressed borrowers, those staying in their homes now have more money in their pockets and can afford to take on home improvement projects. This also bodes well for Home Depot. The stock is trading at $28 right now so it’s only $4 above the 52-week low price of $24.47.
Finally, if you’re like me and you’re at home in this heat you probably find yourself wearing less clothing. Is there a trade for that?
Hanesbrands Inc. [HBI] is a stock that comes to mind as they are one of the largest manufacturers of underwear. I got this idea after reading an article about odorless underwear sales surging in Japan. If it’s hot and humid you’re probably showering more frequently and walking around your house in your briefs more often (just admit it, you do). This means that you have to probably replace some of those boxers which have holes in them or just get more underwear because you’re changing so much more frequently. Based on their positive earnings results announced today, I’d say Hanesbrands has further room to run in the next few weeks as the temperatures continue to sizzle. Finally, Fast Retailing, the parent company of Uniqlo was mentioned in the article about the odorless underwear. I wrote about Fast Retailing awhile back. They recently had to pare back some of their forecasts, but longer term, I still think Fast Retailing is a company that is still experiencing rapid growth.
