The United States has just been through one of the coldest cold snaps in its history, with the weather so extreme that dozens of people died.
Energy systems strained under high demand, leaving 1.8 million American homes and businesses without electricity on Christmas Eve. Thousands of flights during the busy holiday season were cancelled.
“Two-thirds of the country were under extreme weather alert as the ‘bomb cyclone’ brought blizzard-like conditions and temperatures as low as minus 45 degrees celsius to some states,” read a Firetrail memo to clients.
Remarkably, out of this chaos, the team at Firetrail has picked out an ingenious stock investment idea:
This ASX company could be busy this year
Such a cold snap is a foreign concept to most Australians, who consider 15 degrees a “cold” day.
But Firetrail analysts noted that what the US has just been through puts a huge strain on infrastructure.
“A freeze event causes water in the pipes of home plumbing systems to expand, freeze and ultimately burst,” read the memo.
“The upshot is that repair and maintenance work for plumbers will spike following the catastrophic event.”
So what does this mean for ASX shares?
Firetrail reckons plumbing parts supplier Reliance Worldwide Corporation Ltd (ASX: RWC) could rake it in from all the pipes that need fixing in the US.
“Back in 2021, Reliance Worldwide saw an incremental $42 million, or 8.5%, increase in sales driven by the [previous] freeze event.”
The current forecast is for 3% revenue growth for the second half, but the Firetrail team suspects the company could beat this.
“We see upside to these expectations as the freeze event will clear any surplus inventory in the channel supporting demand into 2023,” the memo read.
“We believe the market is underestimating the portion of Reliance Worldwide’s sales that are linked to routine, nondiscretionary repair work.”
Freezing weather is becoming more routine
Unfortunately, global warming means extreme weather is becoming a more regular phenomenon.
“Events like these are becoming more frequent as illustrated by the fact that the last major freeze event in the US occurred in only 2021.”
To top it off, the Reliance share price is fairly cheap for anyone wanting to jump on the bandwagon right now.
That’s despite a 14.5% climb already this month.
“At 12x one-year forward P/E, we believe Reliance Worldwide offers investors an attractive entry point to a quality growth stock.”
