Stockchase Opinions

David Driscoll Dow Inc. (Formerly Dow Chemical) (DOW-N) DOW-N DON'T BUY Dec 29, 2022

Chemical companies are industrials, and industrials do poorly during recessions. Shipments are down 14%, so earnings will struggle. 7x earnings. Dividend hasn't grown in last 5 years, so higher inflation wipes out your income. Yield is unattractive at 5.6%, which is only high because stock price has come down. Instead, he owns DHR and TMO.
$50.590

Stock price when the opinion was issued

chemicals
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PAST TOP PICK
(A Top Pick Jun 26/19, Down 15%) He sold. He liked only a part of the new proposed Dow.
BUY ON WEAKNESS
We'll be in a trading range in the short term at least. The Fed is so behind the inflation curve; inflation so high. Can the Fed engineer a soft landing? Even 7 rate hikes won't cure inflation. We need to fix supply chains. On the positive side, she always felt 2022 growth will be slower than 2021, because fiscal supports have ended. Housing is still strong. Banks are lending, and consumers have historically high amounts of cash to spend. She is adding during this weakness to Dow Chemicals and American Express for example. Look for solid fundamdentals.
WATCH
It reports Thursday. Plastics and copper are directly tied to economic growth. Listen to the quarterly call for their progress to gain clues about the economy.
COMMENT

Shares popped last Friday on hopes that China's stimulus plans can boost Dow, a stock that has been slumping lately.

BUY

The best time to buy this is right now, at the start of rate-cutting, which will boost housing and products associating with home-building like appliances and carpets which require chemicals. Also, China's stimulus is a boost to cyclicals levered to China's economy.

BUY ON WEAKNESS

Still sells at 20x PE. Estimates keep going down, because of China--stocks that have any association with China tend to hurt. That said, if this stock reaches a 7% dividend yield, you must buy.

DON'T BUY

It's tied to China, like all materials stocks are, and those stock keep going down. Don't touch this until at least January.

DON'T BUY

It's broken. When a stock's broken support, you don't want to buy it.

DON'T BUY

Like the other chemical companies, DOW is trading as if they are just calls on China turning around. This is wrong to do.