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Disasters Can Make You Rich!

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March 11, 2011 – Comments (4) | RELATED TICKERS: MEE.DL , BP , TM

It is strange but if you pay attention, nearly every year opens the door to disasters that affect companies and give windows of huge opportunity to several stocks and sectors on the stock market.  Without further talk, let's walk... through the history of recent disaster:

September 11, 2001 - Everything - after the terrorist disaster; the entire stock market took a 10%+ hit. 

August 23, 2005 - Hurricane Katrina - Fuel/Agriculture - affected everything from housing to agriculture to oil companies to retail sales.

November 2009-Spring 2010 - Toyota Recalls - TM - over 8 milllion cars are recalled after defective acceleration pedals; stock goes from over $90/share to $68/share over course of few month.  It bounced back to $90+/share. 

2010 JNJ Recalls - JNJ - J&J had more than a dozen recalls in 2010 including one for Rolaids Softchews on December 9; Tylenol Cold Liquid products on November 24, Children’s Benadryl Allergy Fastmelt Tablets on November 15, Junior Strength Motrin on November 15, Rolaids Extra Strength Softchews on November 15, Tylenol 8 Hour on October 18, and various Tylenol products plus Benadryl Allergy Ultratab Tablets and Motrin IB products on July 8.  Stock seasaws throughout year from highs of $65+ to lows of $57.  Because JNJ is so huge in value, stock doesn't get hit % wise as bad but for a stock that rarely moves more than a couple of dollars in share price, these were clearly affecting the stock. 

April 5, 2010 - MEE - explosion on Massey owned mine kills 29 miners; stock goes from $54+ to $27 in 3 months; 50% drop.  Today it is over $60/share and struck a buyout deal.

April 20, 2010 - BP - explosion of Deepwater Horizon caused tons of oil to flood Gulf of Mexico; stock goes from nearly $60 to $27 in 2 months; over 50% drop.  Today it is near $48/share and dividend is coming back.  Spill also affected RIG which also saw similar returns.

March 10, 2011 - TM - 8.9 earthquakes hit Japan; I expect significant drops to Japanese companies like Toyota.  At pre-market today it is at $85/share and off nearly 3% from previous day closing.

There are definitely other disasters of the past few years that have affected companies one way or another.  But if you just pay attention to the few mainstream ones like a BP or an MEE, you can easily make enough profits to cover a year of grinding it out on the smaller stocks.  Of course I left out infamous 2008-2009 housing/financial bubble.  But surely you can guess that it would be hard not to make money on the historic March 9, 2009 day.

Cheers!

4 Comments – Post Your Own

#1) On March 11, 2011 at 11:57 AM, EPS100Momentum (72.51) wrote:

Bad things are good for the Economy:

Many people see disasters and think oh god where will the money come from to fix it all up? Well many buildings and infrastructure are insured against disasters.

Yes Insurance companies will take a hit but they make it up with major profits from areas not hit by disasters for 20 to 50 years at a time while still charging hefty premiums..

Disasters are always good for the economy: especially for construction / material business as well as for heavy equipment use or purchase and for purchases to replace household goods like clothing, appliances, TV's, furniture, boilers, furnaces, etc etc..

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#2) On March 11, 2011 at 12:36 PM, mikecart1 (98.61) wrote:

Yes EPS100Momentum,

I have a feeling that many construction companies that already have contracts in Japan have $ signs in their eyes now.  It happened with Katrina and will have even more in Japan.  Japan isn't a country that sits around doing nothing.  They will build back up and paying attention to who profits is what will really matter.  I know my eyes will be on Japan for the coming months.  I see many strong buys in the future.

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#3) On March 16, 2011 at 9:31 PM, Billyraybobbates (< 20) wrote:

Great.

Always glad to have a nice disaster. But where is the best place to put some money ? 

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#4) On March 28, 2011 at 2:11 AM, daddysretirement (< 20) wrote:

I'd be deep in BP- except, and the except is everything, we still don't know her liabilities in terms of the Macondo blow out and the BP/TNK arctic deal seems to be up in the air.  Now, I wouldn't say this one is loser, but based on the smallishness of her dividend and her poteintial liabilities, she makes me wonder.  It might be a growth stock and it might be a something that drags your portfolio into places you just don't want to be.

 I wish this one was more clear.  But as she stands, she's a gambler.

Louie

 

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