Profiting from the Weather


According to the National Oceanic and Atmospheric Administration, more than $1 trillion of the U.S. economy is weather-sensitive.  Energy, agriculture and tourism are just a few examples of industries that are highly susceptible to climate conditions.  Because so many industries are dependent on the weather, it is no surprise that the financial community has begun incorporating weather predictions into their business valuations and investment strategies.

Integrity Research Associates has identified two companies that provide weather-related business intelligence: Meteornomics and Planalytics.  Both companies examine historical weather patterns and predicted future weather events in order to determine the level of exposure that a company has to the climate.  While Planalytics markets its services primarily to corporations, Meteornomics works mostly with investors to evaluate financial positions.

According to Stephen Bramlett, President of Meteornomics, most investors use weather-related intelligence to evaluate short positions.  Examining past weather patterns can provide insight into the financial performance of a company prior to the release of earnings data.  It is also possible to use weather predictions to anticipate future earnings surprises, but it is hard to make long-term forecasts with a high degree of certainty.

If global climate change proves to be as serious a threat as many scientists believe, it is probable that weather-related investment research will become a mainstay on Wall Street.  At present, however, it is still a niche approach with a small but steady following.


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