×

Goldman’s wintry play: Cold-weather stocks that could keep your portfolio warm

The weather outside may be frightful, but Goldman Sachs has stock suggestions that could be delightful for investors' portfolios.

Goldman's options research team came out with a list of stocks that have "strong fundamental links to cold weather" — in other words, stocks that could do well as the weather gets colder.

This includes natural gas stocks like Southwestern Energy, which benefits from increased demand for home heating, along with consumer discretionary stocks like Domino's Pizza, which may benefit from a greater desire to have one's food delivered during frigid weather.

Also on the list are cold-weather apparel specialist Columbia Sportswear, car-parts providers Advance Auto Parts and AutoZone, and a few other energy and consumer discretionary companies.

The Goldman team, led by Katherine Fogertey and John Marshall, found that this group of stocks outperformed the S&P 500 by 9 percent in cold winters — and underperformed by 2 percent in warm ones.


Due to this divergence, they suggest buying bullish call options to profit from a potentially colder winter, explaining that "the options market is not pricing in the potential for these stocks to trade sharply higher if the cold weather of recent stays."

Yet not everyone is on board with the tundra trade.

"This is a horrendous idea," Oppenheimer head of technical analysis Ari Wald said Thursday on CNBC's "Trading Nation." "This is a strategy based solely on predicting what the weather is going to be."

The trade is indeed very likely to lose money if the weather turns warm. But in Goldman's defense, its argument is that the potential for an overly cold winter is currently being underappreciated, making these bets clever.

If forced to buy one of these stocks, Wald would choose Columbia Sportswear — a "big underperformer" that now looks to be forming a bottom.

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

Read more

Connect