The fires and drought have dominated the landscape for some ASX shares, is it creating an opportunity to buy them?
We have heard from plenty of ASX shares that they have been affected one way or another by the conditions.
For example, Kangaroo Island Plantation Timbers Ltd (ASX: KPT) has been very seriously affected by the fires. Retailer Mosaic Brands Ltd (ASX: MOZ) reported comparable sales were 8% lower due to bushfire-related impacts.
The Nufarm Limited (ASX: NUF) share price was crunched (again) when it said that its earnings were expected to be significantly lower than the prior period partly because of climate conditions.
The share price of Costa Group Holdings Ltd (ASX: CGC) has also been heavily affected by the dry weather in regional areas.
For crops, low levels of rain means they require more water from water entitlements, at a higher price, and the crops usually don't grow as well. It's no wonder that several agricultural businesses are having a tough time.
Are these opportunities?
One of the best, and most over-used, pieces of investment advice is: "Be fearful when others are greedy and greedy when others are fearful."
Investors are definitely fearful about many of the shares I've mentioned above. It's probably easier to say that iron ore or copper prices will eventually recover when they're down, and therefore we can have the medium-term confidence in BHP Group Ltd (ASX: BHP).
Eventually the rain should come back to these dry regions. When you look over the past two decades you can see there are cycles between wet, average and dry periods. But are rainfall patterns changing permanently because of climate change? It's impossible to say without a crystal ball.
However, at this share price I think a business like Costa could almost be in a no-lose scenario. Either rainfall returns and Costa finds growing conditions easier, or the hard conditions put some smaller and/or poorly managed growers out of business which should lead to rising food prices.
Foolish takeaway
Farmers and other regional businesses have been doing it tough for some time. I hope consistent rain comes soon, one stormy week doesn't make up for years of dry weather. Out of the affected shares, I think Costa could be the best to 'play' the turnaround. But Duxton Water Ltd (ASX: D2O) could be an idea to own if rain continues to be sparse.
