Yes, it is interesting that the traders seem to be ignoring the weather issues in California. It may be simply because these macro factors don't fit into the models they rely on.
Back in January, I read one of the quantitative analysts from Patersons listing SHV as one of the companies likely to surprise on the downside, based on the modelling he was using. I may be mistaken but I seem to recall the same analyst said pretty much the same thing last year.
But Select is an atypical oddball stock, and as such I get a sense that the modelling that these analysts use to assess this company are pretty flawed.
The models used by the quants don't capture many of the complexities that impact this stock, such as local weather conditions, political issues in the US, and of course the weather in California, all of which look pretty favourable for Select at the moment.
Admittedly, there is a lot of uncertainty involved when you are talking about politics or the weather. The US election result last year that got Trump elected is a case in point.
Likewise, it is hard to assess the ultimate impact of the recent storms in California. I noticed
this article from a Californian news site earlier today, which gives a useful overview of the damage of the storms to agriculture.
At the moment, there is some uncertainty as to the full extent of the damage, as noted below:
...It could take several weeks for growers to assess damage from the storms, which combined with already saturated ground and high river levels from reservoir releases to cause widespread flooding.
The storms’ peak was Feb. 17, when Santa Barbara sopped up 4.16 inches of rain. Elsewhere, 3.26 inches of rain fell on Oxnard, 2.34 inches were recorded in Red Bluff and 1.72 inches were dumped on Salinas, according to the National Weather Service. Two to 3 feet of new snow fell on the northern Sierra Nevada over the weekend, according to the National Agricultural Statistics Service.
The storms came a week after growers in Butte, Yuba and Sutter counties were among the 188,000 people forced to evacuate as the Oroville Dam’s secondary spillway was in danger of failing. Crews later used trucks and helicopters to move large rocks and gravel to fill in erosion on the emergency spillway.
A large portion of the Eastern Sacramento Valley’s $1.5 billion agriculture industry is directly in the path of flood waters from Lake Oroville if the dam or its spillway were to fail.
Perhaps the biggest concern from all the stormy weather is with the almond blossom. Bees don’t fly in the rain or strong winds and prefer temperatures higher than 55 degrees, so even the clear but cool afternoons after the rain weren’t much help.
“While today is a beautiful day and yesterday was a beautiful day, it’s downright chilly,” Butte County Farm Bureau manager Colleen Cecil said on Feb. 23, when the high temperature was 52 degrees. “I know that bees are pretty resilient.”
Moreover, some trees were blown over by strong winds, although Cecil said the damage wasn’t as severe as on Jan. 4, 2008, when Butte County lost 10 percent of its almond trees to a windy rainstorm.
As mentioned in the above article, the biggest question at the moment is the extent to which the weather has disrupted the pollination process. Another US website published a report on this topic several hours ago. The article quotes David Doll, the Californian almond expert, who seemed a bit pessimistic:
“Cooler temperatures associated with the rain often increase the length of bloom but generally, negatively impacts crop set because you are having disruption of the flower and the pollination process,” Doll said. “With the trees opening up coming into this rainstorm, the expectations are going to be a bit lower this year. I think it is going to be a challenging year.”
Series of storms threatening to disrupt pollination
(20min delay)