August 24, 2009
– Comments (8)
DOW, DD, or KOP
Please provide reasons why you think the one you picked has more upside:
Thanks in advance.
If we're talking about chemical comapnies with upside, I'd say to look at Shengda Tech (SDTH) in China.
My favourite stock in that sector is BASF (BAS.DE, BASFY.PK).
Guys just being your favorite stock is not reason enough to buy. Give fundamental reasons.
This yahoo poster says KOP can go to $117 and he provides data to back it up. Can someone go over his numbers and see if they make sense , here is the link:
DD....disclosure of bias: i grew up along the brandywine river and spent massive amounts of my youth finding and farting around in their little stone gunpowder mills - still there from the revolution - many still blackened under the moss from blowing up & hidden in dense forest. Their influence on how I look at innovation in general has been good to me. They have the best 'story' of any company out there.
All these stocks are beat up but in dupont's case it has to do with exposure to paint, solvents, and material for both homebuilding and automotive. These are more along the line of tidal trends that will turn again as opposed to crap management like w/DOW.
A company w/ a long list of innovations like TNT, mylar, cellophane and -important going forward - industrial scale refinement of agricultural nitrates, is likely to be good for more. The breadth and depth of their chemistry and related talent is 2nd to none.
A lesser known and lucrative sideline for them is monetizing their currency exposure via the 300+ countries they operate in. This started in the 70s and has expanded to providing services to other global players & industrials, mostly on the down low but real as it gets. Some of the best currency 'engineers' around are in-house there. If they had less character they could have declared themselves a bank and grabbed some TARP:)
I know this is probably more anecdotal than you seek but empirically they all look a little sad:( so that's where the action is. With these kinds of headwinds i like a minus 7to14% start limit w/patience scaling in.
ooops, make that 300+foriegn ops in 90+ countries w/60+% sales outside US. KOP might be an ok trade - projections are just that, wood/forestry exposure probably the hang-up. DD still way more investment grade; has cash and diversity - more staying power in a crunch.
I hold a cash position in DOW and got in fairly cheap. DOW has shown resistance recently around $23 but has the possibility to go past this, but I think it should correct down as it wen heavily negative in cash flow this last quarter. They did still pay a divi of $0.15 on their common stock however. Just sharing my experience, please don't take it as advice as I am by no means qualified.
Shengda Tech -"The Company is engaged in developing, manufacturing and marketing nano precipitated calcium carbonate, as well as manufacturing and marketing coal-based chemicals, including ammonium bicarbonate, liquid ammonia, methanol and melamine."Apparently they no longer manufacture coal-based chemicals, including ammonium bicarbonate, liquid ammonia, methanol and melamine. The nano precipitated calcium carbonate is their only business now, they have ridden themselves of the lower margin coal-based business. This fact is what has the stock running under the radar.Their lack of earnings growth is because they cut off 60% of the business, in favor of a fast growing nano precipitated calcium carbonate business. Nano precipitated calcium carbonate is an additive that makes products such as paper, asphault, and tires stronger and more cost efficient. The company's R&D efforts are also opening more doors for the company. China's growth of the middle class ensures that there will be more roads and tires, which should greatly benefit Shengda Tech. I also believe they will increase their margins on the top and bottom line.