Dow Inc. (Formerly Dow Chemical) (DOW-N) (DOW)

The chemical sector over the last few years has been the best place in basic materials. The low price of natural gas has helped. When the markets corrected, all chemical stocks sold off, found lows and tested them twice. This one is behaving quite well. The market is voting that this is one of the places you could see a good recovery.

(Top Pick Nov 7/14, Up 4.65%) He decided there were other things he liked better. It is recovering and the volume is coming back into the stock.

They had a huge spread benefit based on Nat gas prices. But the entire group has been trading down. It tends to be a cyclical stock. He would wait for another quarter before getting into another name like this. He prefers PPG-N.

This is a high beta play on economic growth, and particularly on industrial production. Given the weakness we are starting to see, he doesn’t like this.

This is looking a lot better. There is an activist involved, which is one that tends to get the results. The chemical industry in general is one that is ripe for activism. A very cyclical industry. They tend to do things just at the wrong time. In general there is a renaissance in the chemical industry, because of low gas prices and a resurgence of the US oil/gas industry. This is probably a good time to be in this.

One of the big input costs for chemicals is natural gas, and prices have been very weak for natural gas. This company benefits when the economy is a little stronger. It concerns him the way chemical stocks sold off in October. He wouldn’t want to see this dip below $50, so if you own, use that as a Stop. He would like to see it make a new high by trading through $55. Feels there may be better names. 3.2% dividend yield.

This company made a big switch. They were in commodity businesses that had low margins. Decided to shed some of their historic businesses and go into higher value chemical products that have higher margins. Low raw material costs pushed up margins for the 9th straight quarter in the plastics business. Have a lot of room to the upside. Yield of 2.99%.

This is a cyclical, so if we are in a global slowdown, it is very hard to know where this one is going to go. The last 3 weeks has been brutal on this stock. He would like to see it trade above $46.82 before he put any money into it. His model prices $40.34, a negative 10%.

Have been selling off their commodity type businesses. Stock has held in relatively well. They are benefiting from low natural gas prices because as a chemical producer, natural gas is a big cost. This is on her watch list, but it hasn’t pulled back as much as some of the industrial names. Her preference would be for something that has pulled back more.

You won’t get that much growth, but soft oil prices could benefit them. It had a decent run in the past two years. There is not a ton of upside, but there is a possibility of some earnings growth.

It is in the materials space and they do better later into the cycle. It is getting a bit frothy. 16 times forward PE. Take profits.

Likes companies like this because of the structural trend towards lower natural gas prices in North America. Any time you can find a chemical company that has a lot of North American-based production, that puts them at a very good advantage relative to European and Asian production. Nice dividend yield.

This company and DuPont (DD-N) are trying to shed non-core assets, which are mostly the plastic businesses. They generate a ton of cash flow. Earnings have been good and the stocks have been rising in this rally because this latest rally has been on the back of industrials and the big commodity companies. This is a good company and will continue to do what it is supposed to do as long as the economy continues going forward.

Done a good job of repositioning business over the last few years and focusing on more specialty products. Getting better margins on their products. Costs are relatively low because of oil and gas prices. Good play on a slowly improving US economy and improving housing and auto markets. Continue to own.

Dow Chemical (DOW-N) or Dupont (DD-N) for a 2-3 year hold? He prefers Dupont.