Winter is coming. So now is a good time to think about weather and its effect on businesses. As a long-term investor, The Motley Fool's Brendan Mathews says he wouldn't buy or sell a stock based on random weather patterns. But weather does have a big impact on our economy and businesses.
Consider a few examples. Last year, too much snow in the high plains delayed oil shipments from the Bakken formation on Burlington Northern trains, reducing the railroad's ability to deliver profits to parent Berkshire Hathaway (NYSE:BRK-B). Last year's cold weather also slowed down store traffic at Chipotle Mexican Grill (NYSE:CMG) and Burger King Worldwide (UNKNOWN:BKW.DL), and nasty weather reduced UPS' (NYSE:UPS) profits by $125 million in a single quarter. Meanwhile, utilities and natural gas providers benefited from the colder weather.
That's why Brendan sought out weather and financial-markets expert Barney Schuable. Schuable has worked in insurance, he has written a Harvard thesis on catastrophe risk, and he joined Goldman Sachs (NYSE:GS) to develop weather derivatives. Today, he's a principal at Nephila Advisors, where he oversees a weather fund.
In our conversation, he explains why investors need to think about the weather, how companies can insure against it, and how investors can approach climate change.