Playing Snow and Cold Pain for Quick Gains

You’re probably recovering from last night’s Super Bowl or at least from a Super Bowl party. If you lived in the Midwest or Northeast, you probably watched the game with one eye, while the other one was on a smartphone or tablet tracking winter storm Linus that was expected to drop a foot of snow on Chicago before reaching the Northeast.

On Linus’s heels, a rash of arctic cold is slated to follow that will drop temperatures and have people turning up their thermostats. That winter combination follows the much hyped no-show-snow storm last week that underwhelmed but still dropped several inches of snow in the Northeast.

Pain points be they short or longer term in duration represent great investments if you identify those poised to profit from the pain. With an eye on the winter storms and ensuing arctic cold, here’s a look at some potential winners and victims.

One industry that will get hit hard will be the airlines, particularly those with heavy exposure out of the New York and tri-state region and New England. I can vouch for the airline disruption first hand because last week United Continental (NYSE:UAL) scuttled my flight from Newark to California. Already, airlines have grounded more than 1,200 flights through Monday, according to flight-tracking service FlightAware.

As the storm progresses, odds are high that figure will be revised higher. That eventual total will add to the more than 6,000 flights that were cancelled last week. Airlines with major hubs in the combined path of these two storms are United, Delta Air Lines (NYSE:DAL) has meaningful exposure to the impacted areas as does Jet Blue (NASDAQ:JBLU) and American Airlines (NASDAQ:AAL). While they are benefiting from lower fuel costs, cancellations tend to wreak havoc with an airline’s revenue.

On the beneficiary side, there are the logical players: Home Depot (NYSE:HD) and Lowe's (NYSE:LOW), as consumers look for shovels and snow blowers. Speaking of snow blowers, Toro (NYSE:TTC) should benefit from the storm as should Compass Minerals (NYSE:CMP), a company that sells salts to help de-ice highways, streets and sidewalks. Last year we saw generator companies like Generac (NYSE:GNRC) perform well during the frequent number of snowstorms we saw in 1Q 2014, but so far this is just one storm. If we see more snowstorms of size, GNRC could be ones to look at.

A category of companies that should see some pick-up demand is utilities as people crank up the heat to stay warm. In the Chicago to New York tri-state region, that means shares of Exelon Corp. (NYSE:EXC), which owns Chicago based ComEdison and Philadelphia’s PECO, and Con Edison (NYSE:ED). I prefer the more diversified play that is the Utilities SPD (XLU). While there has been much talk about natural gas production, a storm like this is great for goosing nat-gas demand, at least from a psychological perspective if not a fundamental one. That means shares of United States Natural Gas Fund (UNG) could be a quick trade this week.

One wildcard is food delivery and to me that means pizza from the likes of Domino's (NYSE:DPZ) and Papa John's (NASDAQ:PZZA). Despite all the hoopla of its recent IPO, I tend to doubt people will venture out in the snow and cold to grab a bite to eat at Shake Shack (NYSE:SHAK), at least until the severe weather passes.