There are few easy ideas in the market, but today I'm going to give you one that comes pretty close: Watch Hurricane Dean.
Before we get to the thesis of greed, let's take a moment to think of the folks who are in the path of this very dangerous storm, and wish them all well. Storms like these are incredibly powerful and incredibly frightening, and it's to the latter point that investors should look.
More specifically, they should watch what Hurricane Dean is likely to do or not do to the airports run by Grupo Aeroportuario del Sur, known as ASUR (NYSE:ASR). Watch very closely, because there's a good chance that money will be made by the brave and the stalwart.
Why do I say that? Because when Hurricane Wilma did a number on Cancun a couple of years back, ASR's stock dropped like a rock. Much hotel infrastructure in Cancun and neighboring Cozumel was damaged, meaning that traffic to ASR's main two airports would be depressed for nearly a year to come. That put a pinch on passenger traffic, with the resulting, and predictable, drop in earnings growth.
I bought fistfuls of ASR back around $30 a share, and within a couple of years it had climbed as high as $55, for a relatively quick gain of as much as 80%. I even recommended that my fellow Fools do the same in our first Motley Fool international report, Around the World in 80 Minutes. Lo and behold -- the hotels were rebuilt, the vacationers returned, the money began to flow, and ASUR's stock recovered.
The stock has been battered again of late, though it's still returned 39%, which is a good 26% better than you'd have made with the S&P 500. The recent drop is partially thanks to an overall flop in the Mexican markets, and it may also have something to do with Hurricane Dean bearing down on the Cancun area. Dean will not, it appears, make a direct hit on that location, though it's still possible.
Jittery investors are probably remembering the months and months of malaise that greeted those who rode the stock from $40 to $30 back when Wilma did her Bamm-Bamm impression. And with Dean expected to reach Category 5 status before making landfall early Tuesday morning, the effects could be even worse.
Foolish investors would do well to consider the long-term outlook and ponder the inevitability of continued tourism business in the area. Getting in now is still a bit of a bet, rather than an investment, because if Dean hits Cancun and Cozumel hard, things will be ugly. However, if the storm does pinch ASR's business and the stock drops like a rock again, it will be investment time. Rebuilding will come, and with it will come passengers on carriers such as JetBlue (NASDAQ:JBLU), Continental (NYSE:CAL), UAL's (NASDAQ:UAUA) United, and AMR's (NYSE:AMR) American. To me, this seems about 100% certain. The extent of damage and pace of recovery (if any is needed) are wild cards, but I believe there's about a 0% chance that Cancun will be abandoned for good. And going to Cancun means flying to an ASR airport.
Sounds nutty, right? I'm advising investors to consider a staredown with a Cat-5 hurricane? Well, not exactly. Anything can happen in the next few months, but no matter what happens in the short term, I think an investment here will turn out to be a long-term winner. And rest assured: Taking this kind of financial risk from the comfort of our distant computer screens is easy -- much less scary than living through one of these blowers where it makes landfall.
Seth is part of the Motley Fool Global Gains team, where he loves to look for monopolies like airports, the toll bridges of the sky. A free trial will get you a look at other great international investing ideas.
At the time of publication, Seth Jayson, who is a top-10 CAPS player, had shares of ASUR but no positions in any other company mentioned here. See his latest CAPS blog commentary here. View his stock holdings and Fool profile here. JetBlue is a Stock Advisor pick. The Motley Fool has a disclosure policy.
