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4 hot stocks for a heatwave

With Australia in the throes of a heatwave, it might feel like the economy is coming to a standstill with it simply being too hot for workers and consumers alike.

It’s certainly not unusual for the weather to be a consideration when it comes to investing, as weather – particularly at the extremes – has always played an important part in determining the outcome for companies across a range of industries each year.

The agricultural sector is arguably the industry most reliant on the weather with yields often dramatically affected by adverse weather events. Other industries which are prone to suffer from adverse weather include the mining industry which can experience production stoppages; the insurance industry which is affected by severe weather events it has written premiums against, and the retail industry which has to try and predict the demand for certain products based on seasonal weather patterns.

On the whole extreme weather events are usually associated with a decline in earnings for the companies affected, however there are companies which are positioned to benefit from extreme weather events. The following four companies stand to gain from the heatwave being experienced across Australia at the moment.

1) Amongst its portfolio of entertainment venues, Amalgamated Holdings Limited  (ASX: AHD) owns the Event Cinemas chain, which has operations across mainland Australia. The air-conditioned comfort of the cinema makes it a popular venue on hot days.

2) Gage Roads Brewing Co Limited  (ASX: GRB) is a contract brewery based in Western Australia that also produces beers under its own label. Australia has one of the highest rates of beer consumption per capita in the world and the current weather is bound to provide a boost to sales.

3) Funtastic Limited  (ASX: FUN) is a wholesaler and distributor of toys and kids products. Amongst its portfolio of brands is the Floaties brand, which is likely in use at pools and beaches right across Australia. The company recently released an innovative cup designed for use in the home that makes slushies in a matter of seconds. Just as beer might be the beverage of choice for cooling down adults, no doubt home-made slushies will be a hit with many kids.

4) Westfield Retail Trust (ASX: WRT) comprises a portfolio of 47 high-quality shopping centres across Australia and New Zealand, including Bondi Junction in Sydney. Foot traffic through malls on hot days is generally high as shoppers escape the heat for air conditioned malls. The fact that most retailers are also in the midst of end-of-season sales should also add to the appeal this week.

Foolish takeaway

While the long-term earnings potential of companies may not be affected by a short-term heatwave, the upcoming reporting season in February could see companies such as the ones above reporting a nice boost to their earnings thanks to the weather.

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Motley Fool contributor Tim McArthur owns shares in Funtastic Ltd and Gage Roads Brewing Ltd.

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