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So far this winter, it’s been unusually warm. And the rest of winter is expected to be warm and wet by historical standards.
This comes as El Niño is shaking up things yet again. The Northeast is expected to be warm, with the Gulf of Mexico area seeing severe storms, while heavy rains will hit the Southwest. These are all things that mean less snow and higher temperatures versus previous years.
With all that in mind, let’s take a look at some of the winners and losers of a warm winter:
Ice Cold Stocks to Avoid
First up are the snow plow companies. Douglas Dynamics (NASDAQ: PLOW) owns over 50% of the snow plow market share. Without snow to push, these guys won’t be doing much business.
Then there’s the snowmobile makers, such as Polaris (NYSE: PII) and Arctic Cat (NASDAQ: ACAT). However, both have other businesses they can rely on. The one stock with the most exposure to snowmobiles is BRP Inc. (OTC: BRPIF), which makes Ski-Doo – the No. 1 snowmobile brand in the world.
Other general names to avoid include snow blower maker Toro (NYSE: TTC), rock salt maker Compass Minerals (NYSE: CMP), generator maker Generac (NYSE: GNRC) and winter apparel maker Columbia Sportswear (NASDAQ: COLM).
Winter Stocks Worth Buying
Outside of the typical “winter” stocks, there are a number of beneficiaries to the warmer winter. This will include various restaurants and retailers, as warmer weather means more people are out and about. But picking a clear winner or loser in retail and restaurants is tough. However, some retailers will be hurt, especially those that rely on winter inventory like Dick’s Sporting Goods (NYSE: DKS).
Yet, warmer weather does mean more home improvement and lawn care, which will be a boom for the likes of Home Depot (NYSE: HD). Another angle could be more travel, such as the hotel stocks.
However, the best buy for the warm winter could be energy.
The Best Energy Play
Suburban Propane Partners (NYSE: SPH) is an interesting play in the energy space. The lackluster demand has led to a 27% sell-off in the stock over the last three months. However, it’s still offering a 14% dividend yield – which is high, almost scary high.
It’s not a dividend play, however, as there’s no guarantee it can continue to cover that distribution. (For truly safe high yields, click here.)
But the key point to note is that the majority of the winter heating days are still to come. Only between 35% and 40% of the days that need heating happened through December over the last two years.
Suburban Propane also acquired propane supplier Inergy a couple years back, which is still leading to some impressive synergies. As well, the propane industry is still very fragmented, leaving plenty of additional opportunities for acquisitions followed by cost cutting. Many of Suburban’s customers are “sticky” as well, meaning they lease their tanks from Suburban – making the switching costs fairly high.
In the end, there are a number of stocks to avoid because of the warm winter, but only a handful worth buying. Picking the winners is increasingly tough, but energy looks to be a market in which investors can find value.
Worry-Free Riches
They’re owned by some of the wealthiest people on the planet. They share a few key similarities that distinguish them from 99% of equities. Even as the S&P keeps breaking record highs, they’re still crushing it. In fact, over the last ten years they’ve outpaced it by a colossal 390%.