Don't chase storm stocks after Harvey, Wells Fargo says

Hurricane Harvey flooded street FBN AP

During natural disasters like hurricanes, investors often turn to companies that might benefit from the cleanup and rebuilding process. But it’s usually a mistake to chase storm stocks in search of quick profits, Wells Fargo said Wednesday.

Hurricane Harvey’s influence on stocks is in full swing. Generac (NYSE:GNRC), a manufacturer of generators, is up 2% this week and jumped 4% in recent trading Wednesday. Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) also recorded instant gains as Harvey first made its way across the Texas coastline. U.S. Concrete (NASDAQ:USCR) has soared 15% since the start of the week.

The Wells Fargo Investment Institute cautioned that while some companies will see a sales boost from emergency supplies, those products typically add little to the bottom line. Scott Wren, senior global equity strategist at Wells Fargo, said long-term investors should stick with their plan and avoid trading for quick gains related to Harvey.

“We recommend that investors seek out quality companies for longer-term investment and not turn into storm chasers looking for a short-term thrill ride in the stock market,” Wren wrote in a note to clients.

Also, Harvey is unlikely to impact the overall U.S. economy in a major way or for an extended period, he said. Moody’s estimated that Harvey could cause $51 billion to $70 billion in damage to property, businesses and lost economic activity.