Hurricane Helene was no longer a hurricane by the time it reached my hometown in northwestern South Carolina.
But it managed to make an undeniable impact all the same.
It’s bad here. Really bad, in fact. I don’t think I’ve ever seen a storm hit Spartanburg the way Helene hit us this past weekend.
I’m hoping to have power back by the time you’re reading this on Tuesday evening. However, right now, I’m sitting in a coffee shop that’s up and running only because the owner made an hour-plus drive to buy a generator.
There are hundred-year-old trees downed everywhere you look. Roads were flooded. Schools are closed for the next few days, if not the whole week.
And, I’m very sorry to report, there were six deaths reported in the county, most by falling trees.
The news elsewhere is equally destructive or worse. For instance, there’s a place in North Carolina called Chimney Rock that I used to visit as a boy.
It’s now utterly ruined, as evidenced by a Fox Weather article published Saturday.
“Images from Chimney Rock, located just southeast of Asheville,” the piece notes, “was one of the many cities destroyed by the historic Hurricane Helene flooding. Since the beginning of the storm, the area has seen between a foot and two feet of rainfall.”
Houses there are totaled. Roads are ripped apart. Debris is everywhere.
“The devastation is beyond words,” resident Banff Luther reported. “We are doing what we can to help each other.” Which is good, because it’s become difficult or even impossible for outside aid to get through.
The picture above is Fox Weather’s image of what used to be Interstate 40 between North Carolina and Tennessee. It’s clearly torn to pieces, leaving officials “unsure when the highway will reopen.”
To call the larger situation “a mess” is the understatement of my lifetime.
The Sunbelt Is Suffering
People here in the Southeastern states of Florida, Georgia, South Carolina, North Carolina, and Virginia – as well as Tennessee – are calling the Helene aftermath a mini-apocalypse. To quote a CNN Weather headline, “1 storm, more than 100 dead, and a 500-mile path of destruction.”
Five hundred miles.
That’s an enormous swath of destruction, and my most sincere condolences go out to everyone who lost loved ones… or homes… or livelihoods. Because you’d better believe there are tens of thousands of businesses impacted – some beyond repair.
The so-called Sunbelt region of the United States just isn’t looking so sunny at the moment.
I bring this up because there’s a harsh but important investing lesson to be learned in the midst of such devastation. I know I’ve been preaching the value of the Southern states for years now, especially after the 2020 shutdowns hit, transforming businesses’ mindset on ideal locales.
And, overall, I’m not rescinding my thoughts on the Sunbelt. It’s still the place to be on so many levels. Helene doesn’t change that.
Massive national and international companies are still moving their headquarters to the South due to their business-friendly environments. And where businesses move – especially as the back-to-the-office push expands – so do employees and their families.
Most of them will stay for the long haul despite this past week’s rude awakening. Which in turn means that other massive national and international businesses will grow their operations there as well.
Take Target (TGT) or Starbucks (SBUX), both of which I’ve utilized in the past few days. My local stores are still open despite the damage done around them.
That’s partially due to their deep corporate pockets and subsequent resources. But it’s also due to luck. Because Target and Starbucks buildings, well-funded though they are, can still be the victims of the unexpected.
Anyone and anything can.
A Better Position to Mitigate the Damage Done
Neither Starbucks nor Target has released an official statement about damages as of this writing. Yet they are now and will continue to be affected for months to come as a result of Helene.
Even if all their buildings weathered the storm, there are still literal road closures to navigate. With both interstates and local routes closed down, their drivers will have to take longer routes to deliver goods.
That means more gas money spent and wages paid.
There’s also the impact on local communities to consider. Some consumers are now literally homeless, so you’d better believe they won’t be spending money on frivolities anytime soon.
They’ll be looking for the best prices possible – and, let’s face it, that’s never Starbucks. Target, for its part, has been discounting groceries and other goods to win back cash-strapped customers this year. Yet there are still plenty of cheaper resources to choose from.
So it’ll be interesting to see both of their fourth-quarter results in the affected regions.
Believe it or not though, none of this is to say you should sell either company due to Hurricane Helene. Far from it.
While I’m not outright recommending them, they do serve as excellent examples of geographic diversity – an enormous safeguard for businesses and investors alike.
You see, Target has 1,950 stores throughout the U.S. So even if one area it operates in – even a 500-mile-wide area – experiences a mini-apocalypse, its other stores should easily make up for resulting losses.
Starbucks, of course, has an even larger geographic footprint. Spread across 87 global markets, it boasts a whopping 39,000 stores.
Now, those 39,000 stores can still be mismanaged, as I believe their previous CEO was guilty of. That’s why the stock was struggling so notably earlier this year.
But with the right leaders in place? It’s practically indestructible!
Not completely indestructible, mind you. An asteroid smashing into Earth or similar occurrences would, no doubt, wipe Starbucks out right along with the rest of civilization.
However, a well-managed geographically diversified company is very well insulated from tornadoes, floods, freezes, earthquakes… and hurricanes.
Keep that in mind as you decide which companies to buy into. You know I’m a big fan of small caps, especially right now. Those definitely have a place in many portfolios. And I can’t wait to write about them again.
But as for the bulk of your stocks?
Those should almost always be economic stalwarts that can roll with the punches. Even when those punches come from something as devastating as Helene.
P.S. I have more to say about this mini-apocalypse and its investment implications. Make sure to read tomorrow’s article as well for more cautionary tips on how to navigate the next few months… and whatever else they may bring.
Regards,
Brad Thomas
Editor, Wide Moat Daily