DuPont de Nemours Inc. (DD-N)

Can benefit from interest rate cuts, since its business is in homebuilding and related.

Spun off a few divisions over the years, running out of divisions to spin out. Nothing wrong with the company, there's just better value elsewhere.

Reported a disappointing quarter today, but he feels is on the cusp to rise. He trusts the CEO who see green shoots in the electronics end markets that would drive company earnings.

They just finished a $3.25 billion share buyback and will start a $2 billion one. They've retired 7.6% of their shares so far this year. All told they will reduce shares by 13.5%, the 3rd-biggest buyback on the S&P 500. If you feel interest rates will continue to rise, Dupont is too risk; Dupont has some cyclicality because it's exposed to autos. Overall, he likes Dupont.

DD operates in a cyclical industry and is now trading at 20x times' Forward P/E. In the last few years, DD did actively sell some of its non-core assets, and redeploy the proceeds into significant share repurchases. The balance sheet is okay, with net debt of $3.7B (the debt has gone down substantially due to the proceeds from asset sales mentioned) and net debt/EBITDA is around 1.1x, okay for a cyclical name. Based on consensus estimates, sales are expected to decline by 5% this year and then normalize to around 5% growth going forward. Given the aggressive buyback (the company even cuts the dividends to do more buybacks), DD is quite attractive, but, given the cyclicality of the business, we would size the position conversatively.
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