The devastation of Hurricane Harvey was a prelude to the devastation of Hurricane Irma. Of course, we spent a good deal of the last few days checking on family and friends who (in my opinion, foolishly) stayed behind in Florida. Everyone appears to be well but in the dark.
Thursday I ran several financial simulations going back to the triple storm season of 2005 as well as more recent hurricane years of 2011, 2012 and 2016. Focusing on The Travelers Companies (TRV), one of the largest and most prominent insurers in the nation, I could see how that stock reacted to the hurricanes in those years. It appeared that worst case, TRV would trade down to $110.
However, on Friday, it began to apparent that Irma was veering toward the western shores of Florida rather than a direct hit on Miami and the eastern shore, indicating less overall damage from an insurer’s perspective. The stock closed at $115.18 on Thursday, opened a bit lower on Friday and then headed higher. Ceding that the stock would not make it down to $110, by midday on Friday; after a client lunch meeting; I decided to commit capital to TRV. We paid a little over $119 for TRV compared to a hurricane low price of $113.76 and 52-week high of $130.37. This was an initial position and I am prepared to add on price strength. For the record, I liquidated our Best Buy (BBY) positions to fund the purchase.
My Gut Feeling is that this stock has seen its low and we will find out in the fullness of time, that any hurricane related losses are probably over reserved by the insurance industry. Furthermore, as is usually the case, premiums will rise in the coming year. Given the inelasticity of insurance premiums, the insurers will benefit.
Overnight futures rose in the US reflecting a better than worst case scenario for hurricane Irma. Furthermore, the wacko in North Korea decided to throw a party over the weekend rather than launch some more missiles, giving Asian markets a positive tone.
This week’s big news will be the new product launches from Apple (AAPL) on Tuesday. That stock made an all-time high last week before backing off. I find that the stock usually rallies into a new product announcement and then tends to ease off. That appears to have occurred a week ahead of schedule.
Small cap stocks are showing some positive outperformance. Whether that is a bounce or evidence of new leadership I cannot say, but it is worth keeping an eye on.
Today of course is a sad day, the 16th anniversary of the 9/11 attacks on the World Trade Center, a day which will forever be indelible in my memory, having personally witnessed the event and fleeing for my life. I usually tune out the media on 9/11, preferring not to relive the event but will keep my market data streaming as I focus on the markets.
However, I leave you on a happier note, the lovely and happy couple Harvey and Irma from Spokane,WA.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long AAPL & TRV — although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant, beverage and agricultural stocks. An individual subscription to the newsletter can be ordered at www.restaurantstox.com Furthermore; Scott is also a professor at the Seton Hall Stillman School of Business in South Orange, NJ.
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