Thursday
Aug102006
Adding to Small Positions: Dow Chemical (DOW), Dell Computers (DELL)
August 10, 2006 at 10:57 AM
I added to a small position in Dow Chemical (DOW). This stock historically has been known as a poorly managed deep cyclical. Right now, it's down 35% from it's high in March of 2005 and basically unchanged since 1999 and it doesn't show any signs of stopping soon. So why did I buy it?
1. I don't have any major exposure to the chemical industry.
2. Dow sports a very low p/e ratio
3. Nice dividend yield of 4.15%.
4. Expansion in developing economies (like China and India) still means demand for specialty and raw chemicals.
5. Dow and other chemical companies have gone through a lot of technological improvement in the last decade that means they use less energy than before and thus don't have as much exposure to oil prices as the market thinks.
Chemical companies are not famous for being big protectors of the environment. However, if you believe the PR on the Dow Chemical site you'd think they are single handedly taught Al Gore about the benefits of environmentalism. I also found another side of the story at in fact.org. For now, I'll own the stock for a medium term trade (I'm happy to collect the dividend while I wait for the trade to work out).
After a rally of its lows set in July, Dell (DELL) fell back again to $21 where I picked up some more stock today. I'm just continuing to pick up stocks that do poorly in the summer and better in the fourth quarter.
Disclosure:
I own Dow and Dell. I today I added to positions in both stocks. I am also short Jan 2007 22.5 Strike Puts on DELL.
Disclaimer:
Nothing in this blog is meant to be a recommendation to buy or sell. I do not give investment advice. Do your own research. Do not rely on anything in this weblog to make investment decisions. I do not log all my trades here. I only describe or mention those that I think might be interesting. Consult your own investment professional before buying or selling any security.
1. I don't have any major exposure to the chemical industry.
2. Dow sports a very low p/e ratio
3. Nice dividend yield of 4.15%.
4. Expansion in developing economies (like China and India) still means demand for specialty and raw chemicals.
5. Dow and other chemical companies have gone through a lot of technological improvement in the last decade that means they use less energy than before and thus don't have as much exposure to oil prices as the market thinks.
Chemical companies are not famous for being big protectors of the environment. However, if you believe the PR on the Dow Chemical site you'd think they are single handedly taught Al Gore about the benefits of environmentalism. I also found another side of the story at in fact.org. For now, I'll own the stock for a medium term trade (I'm happy to collect the dividend while I wait for the trade to work out).
After a rally of its lows set in July, Dell (DELL) fell back again to $21 where I picked up some more stock today. I'm just continuing to pick up stocks that do poorly in the summer and better in the fourth quarter.
Disclosure:
I own Dow and Dell. I today I added to positions in both stocks. I am also short Jan 2007 22.5 Strike Puts on DELL.
Disclaimer:
Nothing in this blog is meant to be a recommendation to buy or sell. I do not give investment advice. Do your own research. Do not rely on anything in this weblog to make investment decisions. I do not log all my trades here. I only describe or mention those that I think might be interesting. Consult your own investment professional before buying or selling any security.
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