Hot Profits from 5 Cold Weather Stocks

If you live practically anywhere east of the San Andreas Fault, you know about the deep freeze biting the nation. Temperatures in many areas of the country have been way below normal this winter, especially in the Midwest and East Coast, and unfortunately, many meteorologists think the 2010 cold front will bring plenty of chilly nights before it makes its welcome departure.

According to the 2010 Farmers’ Almanac, this winter will likely see many more days with below-normal average temperatures. Not just in the Midwest and East Coast, but for about three-quarters of the nation. The fallout from these cold temps is a constriction of outdoor activity, more time indoors, increased use of heaters, and when you have to go outside, the need to bundle up.

Fortunately, this year’s cold spell isn’t all bad. In fact, a grumpy Old Man Winter could actually bring warmth to investors savvy enough to take advantage of the extreme chill. And with this in mind, here are five cold weather stocks that might just heat up your portfolio.

Cold Weather Stock #1 - United States Natural Gas (UNG)

Our first cold weather stock isn’t actually a stock; it’s an exchange-traded fund (ETF). It is United States Natural Gas (UNG), an ETF designed to replicate the performance, net of expenses, of natural gas. The logic for UNG is simple. The colder it is outside, the more we need to heat our homes and offices, and most of us do this via natural gas. The increased demand for natural gas should translate into higher natural gas prices. Of course, sometimes this simple logic isn’t quite that simple.

On Thursday, Jan. 14, we found out that U.S. stockpiles of natural gas are still well above average for this time of year. The supply situation drove down the price of natural gas in that day’s trading. But I suspect that if we continue having cold weather, as the experts predict, then the supply situation will begin to dwindle as demand becomes stronger. If this dynamic does take shape, it could mean a big surge in natural gas prices.

Cold Weather Stock #2 - Netflix (NFLX)

nflx stock
What do you do when it’s too cold to venture outside? You stay in and watch movies, and these days, most people get their movies from Netflix (NFLX). The DVD rental pioneers were darlings of Wall Street last year, with the stock nearly doubling in 2009. But fears of an inability to meet growth expectations going forward, along with several downgrades of the stock in recent weeks, have knocked NFLX shares well off their highs.

But I suspect this pullback in the stock could actually represent a good buying opportunity in the shares, as Netflix will undoubtedly remain the game-over dominator in the DVD rental space for quite some time.

Cold Weather Stock #3 - VF Corp. (VFC)

Eventually, you have to venture outside no matter how cold it is. To stay warm, you’ll need to bundle up, and what better brand to bundle up with than the North Face? This leading cold-weather gear brand is made by VF Corp. (VFC), which also makes well-known clothing brands like Wrangler jeans, Vans shoes and JanSport luggage. The stock’s been on a tear of late, climbing 33% over the past six months.

On February 9, we’ll find out how the company performed in the most recent quarter. All indications are for a strong earnings showing, and if that happens, it just could be due to amped-up sales from those seeking the warmth of its North Face brand.

Cold Weather Stock #4 - Columbia Sportswear (COLM)

colm stock

Much like VF Corp. and its North Face brand, Columbia Sportswear (COLM) is a leading cold-weather apparel maker. In October, the company raised its full-year revenue outlook after posting better-than-expected third-quarter results.

The clothing maker said it expects sales to fall 8% to 9% for the full year, which is much better than previous estimates for sales to fall in the low double digits. I suspect the cold weather is one big factor in helping Columbia sales do better than expected, and if the cold weather continues, look for sales — and COLM shares — to continue warming.

Cold Weather Stock #5 - Dick's Sporting Goods (DKS)

dks stock

When you need to buy North Face and Columbia Sportswear, where do you go? One hot retailer that sells both is Dick’s Sporting Goods (DKS). In November, the company reported better-than-expected third-quarter earnings on rising same-store sales. Dick’s attributed the rise in same-store sales to strong performance of both the North Face and Columbia Sportswear brands. The company also said the increased sales for these brands were likely due to fears of a harsh winter.

Well, we all know that harsh winter came to fruition, and it’s not over yet. As the cold winds continue blowing, look for more shoppers to continue visiting Dick’s Sporting Goods for all of their cold-weather gear.

By Jim Woods, Contributing Editor, InvestorPlace

9:31 AM

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