Over the last couple of days, there's been a lot of speculation about which stocks will gain or lose the most as a result of Hurricane Sandy's destructive path. In the financial sector, however, there's one clear player that Sandy may have hung out to dry.
Not all companies will be hit equally
Supermarkets like Safeway and home-improvement retailers such as Home Depot (HD 0.90%) were picked to the bone in the waning hours before Sandy made landfall. A friend of mine posted a picture of the flashlight aisle at his local Lowe's (LOW 1.67%), and the only thing missing from the desolate landscape were blowing tumbleweeds.
Alternatively, insurers companies like Travelers (TRV -0.51%) and airlines like United Airlines (UAL 1.02%) are bound to take a hit. Early estimates of the damage caused by Sandy peg the figure at more than $20 billion, much of which will be shouldered by insurers. And according to reports today, upwards of 15,000 flights have been canceled in the storm's wake.
Impact on the financial sector
Outside of insurance companies, few people have discussed the impact of the storm on the financial sector overall. The most immediate repercussions will be felt by institutions that look to market-making and trading as a source of revenue, as the markets have been closed now for two full days. Two names that come to mind immediately are investment bank Goldman Sachs (GS 1.66%) and high-frequency trading company Knight Capital (NYSE: KCG).
Even beyond these, the results are sure to trickle down to the bottom lines of larger institutions like JPMorgan Chase (JPM 1.15%) and Bank of America (BAC 1.55%). Although both megabanks operate across the country, they nevertheless look to investment banking operations for a considerable share of income. In the third quarter of this year alone, JPMorgan recorded $4.76 billion in trading revenue.
The bank that could suffer most
Of all the banks that are likely to be hit, however, the one that stood in the center of Sandy's crosshairs is mid-size regional lender New York Community Bank (NYCB 1.12%).
This stock has long been a favorite of dividend investors, thanks to its generous 7.2% yield. However, its concentration of loans in the New York City area leaves it particularly susceptible to localized disasters such as Hurricane Sandy. In the bank's most recent quarterly filing with the SEC, for instance, it disclosed that a full 90% of its multi-family loans -- that is, the product that it specializes in -- are collateralized by properties in the New York/New Jersey area.
The Foolish bottom line
At the end of the day, there's little question that some companies will be affected more than others by Hurricane Sandy, with New York Community Bank potentially high on this list. But as my colleague Dan Caplinger implored, this doesn't change the long-term outlook and therefore shouldn't change your investing strategy or approach.
In the case of a financial institution like Bank of America specifically, what matters most over the long haul are the risks and opportunities identified in this in-depth report on the nation's second largest lender. By staying abreast of these factors, you'll be in a much better position to profit than if you impulsively trade away your profits by trying to get rich off natural disasters. To download this premium research report on Bank of America, simply click here now.
