Recovery and Prevention. Governments and people are rethinking their
response to disasters and the steps they can take to prevent or minimize
the worst consequences. The biggest catalyst for this new era is the
political fall-out from Katrina.
The slow response to Katrina was a black eye for the Bush
administration. For Michael Brown, the ex-head of FEMA, it was a
national humiliation. The fates of Louisia...
The recovery from Katrina and Rita ushers in a new era of Disaster
Recovery and Prevention. Governments and people are rethinking their
response to disasters and the steps they can take to prevent or minimize
the worst consequences. The biggest catalyst for this new era is the
political fall-out from Katrina.
The slow response to Katrina was a black eye for the Bush
administration. For Michael Brown, the ex-head of FEMA, it was a
national humiliation. The fates of Louisiana governor Kathleen Blanco
and New Orleans mayor Ray Nagin remain to be seen, but reports have
pointed out their failures in prevention and response, and that will
come into play at election time.
President Bush wants to make up for the bungled response (and restore
some political capital)and has earmarked a recovery effort that may
total $200 billion dollars. The early response to Katrina has become a
cautionary tale for politicians and bureaucrats in federal, state and
local governments, and you can be sure they will be pushing for more
disaster prevention spending in their own particular fiefdoms. And the
media is keeping watch—newspapers in California have been filled with
stories warning about the lack of disaster (especially earthquake)
preparation in the state.
The Army Corp of Engineers, burned by the lack of follow-through on
their recommendation to raise the New Orleans levees, is now looking to
repair vulnerable areas around the country. And they're not the only ones.
New homes have multiplied along vulnerable coastal areas. From Florida
to the Outer Banks up to The Hamptons and all throughout the east coast,
coastal property values have soared. Dune Road, a sliver of land with
pricey homes between the ocean and a bay in Westhampton, New York, was
virtually wiped out by flooding little more than a decade ago. Now it
has been rebuilt with even pricier multi-million dollar homes. You can
be sure these homeowners will spend what it takes to protect their
properties.
And they may need to because it looks like big storms are brewing. If
many meterologists are correct, we may have entered a cycle of
increasing frequency and severity of hurricanes.
Combine the measures slated for homeland security, rebuilding the Gulf
coast and the ramp-up of disaster prevention around the country and you
have a near permanent state of disaster recovery and prevention.
For some companies, let's call them Hurricane stocks, the opportunity to
take part in the Gulf recovery means a great deal of more business in
the short term. For others, it may mean more business for many years to
come.
Hurricane stocks are companies that are needed right now. For instance,
the immediate need to help those whose homes have been destroyed or are
unhabitable. Think of companies that provide temporary living and
survival gear. Think of Coleman camping products, such as tents,
sleeping bags, portable stoves, flashlights. Coleman is owned by Jarden
(JAH:NYSE).
Manufactured homes have come a long way in the past decade, and will
prove to be a good temporary solution for many and a permanent solution
for others in the Gulf. Cavalier Homes (AMEX:CAV) has been contracted to
build and deliver manufactured homes to the Federal Emergency Management
Agency to house Gulf Coast residents displaced by Hurricane Katrina. The
contract is expected to generate $58 million to $63 million in revenue
for the company.
Some other compnnies in this sector include Champion (NYSE:CHB), which
partners with nearly 3,000 independent retailers, builders and
developers, Fleetwood Enterprises (NYSE: FLE) and Coachmen Industries
Inc. (NYSE:COA).
Oil and gas facilites in the Gulf coast also need emergency repair. The
economy of the Gulf Coast and, to an extent, the economy of the U.S.
depends on it. A number of drilling rigs were damaged in the storms,
which means that a company like ENSCO (NTSE:ESV) which owns drilling
rigs in the area, will be in big demand. Oceaneering International
(NYSE: OII), which inspects and repairs underwater infrastructure of oil
facilities, will be busy, as will Jacobs Engineering (NYSE:JEC),
providing engineering and construction services to oil and gas companies.
Rebuilding the Gulf Coast
Rebuilding will include the big dogs in construction, like Halliburton
(NYSE:HAL), The Shaw Group(SGR) and Caterpillar (NYSE:CAT). But many
smaller companies will also take part, often as subcontractors. The Army
Corp of Engineers has increased its task order from $10 million to $20
for Aduddell Roofing, a subsidiary of Zenex International, Inc.
(OTCBB:ZENX). National Storm Management (NLST:PK), an expanding national
construction company specializing in storm restoration management, will
also do a good deal of restoration work in the Gulf Coast.
To build you need building materials. Home retailers such as Home Depot
and Lowe's will be seeing their orders increase, but so will companies
that provide raw materials like timber. Take a look at Rayonier
(NYSE:RYN)and Plum Creek Timber (NYSE:PCL), two REITs that own and
manage timber properties.
Some Hurricane and rebuilding stocks have already jumped and retreated.
But the point to remember is that while the hurricanes resulted in an
immediate need to help those in dire need, they also ushered in a new
era, an era when governments and people in the U.S. and around the world
know they can do more to recover from disasters and minimize the
consequences. So keep an eye on companies that will be at the center of
the Disaster and Prevention theme for years to come.
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