Veteran construction company Quanta Services (PWR +3.01%) was building incremental wealth in investor portfolios on the last trading day of the week. It was tagged as a stock that typically rises in the wake of major storms, and investors were eager to capitalize on that phenomenon. They enthusiastically bought into the company's shares, and they closed Friday 3% higher.
Port after a storm
In a research note published that morning, a team of Citigroup (C +1.22%) analysts issued something of a weather-crisis update on stocks in their coverage universe. This was based on predictions that Hurricane Isaias would soon make landfall on the Gulf Coast.
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The bank's pundits identified four construction stocks that have outperformed the S&P 500 index by an average of roughly 2% in the 10 days after major storms. Quanta was one, as were MasTec (MTZ -1.85%), Aecom (ACM -0.30%), and Fluor (FLR -0.65%). This, naturally, is due to heightened investor interest in businesses that could potentially be tapped for reconstruction work to repair damage from such weather anomalies.
The analysts cited plenty of historical precedent for such bullishness. For example, Quanta booked around $265 million from such work following Hurricane Harvey's devastation in Louisiana and Texas in 2017.
NYSE: PWR
Key Data Points
Constructing meaningful returns
I don't believe investors with at least a mid-term horizon should jump on any construction stock because of its potential to score post-storm work. To me, it's wiser to invest in one because it's regularly hired not only for such assignments, but also frequently lands plenty of "normal" projects.
I'd say Quanta particularly fits this bill, as it has become a go-to for artificial intelligence (AI) data center build-outs thanks to its work in power grid updates. This is a key reason its project backlog has ballooned to over $50 billion.
