Insurance industry analyst Michael Dion of investment bank Sandler O'Neill & Partners LLP was a very busy man this week, feverishly tracking Hurricane Ivan as it rumbled up the Gulf of Mexico and threatened to inundate New Orleans and swamp oil-drilling platforms.
As recently as Wednesday afternoon, estimates for insured damages ranged as high as $20 billion, and Dion watched stock prices of big insurers in the gulf region head south while the big storm moved north.
But Ivan's jog to the east spared New Orleans and major oil operations. Risk modeling firm Eqecat Inc., accordingly, dropped its insured damage estimate Thursday to between $4 billion and $10 billion.
Insurance stocks, in response, staged a modest rally.
"I'm looking at a screen full of insurers right now and it's all green," Dion said Thursday afternoon, referring to the color registered by rising stock prices on computer screens. "The fact that it didn't hit New Orleans is a definite positive."
Although Ivan was blamed for at least 20 deaths in the United States and caused widespread flooding and power outages, it failed to deliver the kind of devastating blow that many feared.
Insurers were not the only stocks to gain on Thursday. Shares in some energy companies that pump oil from the gulf also rose, as did stocks of several gambling firms whose casinos in Mississippi and Louisiana were threatened but spared.
Meanwhile, Wall Street traders and analysts -- as they always do -- looked to the future and started to speculate about what sectors and companies might benefit from the big cleanup effort in the Southeast after hurricane season. Top picks included home builders and home-improvement stores, transportation firms and even insurance companies.
Among insurers gaining ground on Thursday was Alfa Corp., one of the biggest policy writers in Alabama. After dropping for two days during Ivan's inexorable approach, Alfa gained 6 cents, or 0.4 percent, to close at $13.71. Allstate Corp., another big insurer in the gulf region, also gained slightly on Thursday.
The 2004 hurricane season will still be very expensive for the insurance industry, with hurricanes Charley and Frances estimated to cost close to $13 billion combined. But much of the damage has come in Florida, which maintains a large public fund to back up insurers swamped by big claims.
And Dion said insurance-company stocks were becoming more attractive because the big hurricanes could allow underwriters to raise rates in the coming months.
Ivan's move away from oil rigs and platforms helped boost shares in Apache Corp., one of the largest operators in the gulf. Apache finished up 33 cents, or 0.7 percent, on to close at $46.90 on Thursday.
Ivan's mild impact was not enough to trigger a drop in oil prices, however. After easing off in the morning, the contract for a barrel of light, sweet crude for October delivery rose 30 cents, to $43.88, as yet another hurricane, Jeanne, threatened to delay imports into the gulf.
The wild swings in oil prices are beginning to take a toll on traders.
"You need to have anesthetic on hand these days, because the daily ranges and volume is so huge," said a trader for a top Wall Street firm who declined to be identified by name because he was not authorized to speak publicly. The trader said all eyes were fixed on satellite images of Ivan over the past few days.
In the gambling industry on Thursday, Pinnacle Entertainment Inc. rose 55 cents, or 4.1 percent, to close at $13.86. Penn National Gaming Inc. rose 69 cents, or 1.8 percent, to finish at $38.39. Both Penn and Pinnacle operate casinos along the gulf and had seen their share prices drop as Ivan loomed.
Meanwhile, Wall Street analyst said winners in the cleanup effort could include home builders such as Pulte Homes Inc., which rose 85 cents, or 1.4 percent, to $62.13 on Thursday. Pulte shares have nearly doubled in the last year.
Big-box home improvement chains catering to do-it-yourselfers, such as Home Depot and Lowe's, are also viewed as very attractive. Home Depot Inc. rose 31 cents, or 0.8 percent, on Thursday to close at $38.70. Lowe's finished up 43 cents, or 0.8 percent, at $53.20.
Brian Belski, fundamental market strategist at investment bank Piper Jaffray & Co., said the 2004 hurricane season could also spur new home building because real estate investors may guess that the next few seasons will not be nearly as active. "You will have people saying, 'Maybe now is the time to go build that second home in Daytona Beach.' "
Belski also suggested that big transportation firms could gain from the rebuilding season. "You need to be able to truck in wood, concrete, cement and all that other kind of stuff," he said.