John Moten has worked in the securities industry for more than 16 years covering chemical manufacturers for most of his career. So, it’s not surprising that he was bullish about chemical stocks.
In general, chemical companies thrive when oil prices are down because they use oil for energy and to produce raw materials. Since oil prices were low last year, Moten, a former Deutsche Bank analyst, was confident that chemical companies would produce and sell more of their products to automobile manufacturers and other customers. As Moten pointed out
last year, chemical stocks are considered cyclical, they tend to climb during certain times in the economic cycle and trail off at other times. “These stocks typically perform best when we’re coming out of a recession,” he noted.Now that the U.S. economy is at the recovery stage, oil and gas prices are soaring again. Moten’s prediction that chemical stocks would be able to ride out the end of the recession and turn a profit came true. At the time this article was written, his four picks had gained a total return of 21% since September 2002.
Selling at $71.62, Potash (NYSE: POT) hit a new 52-week high after Moten recommended the fertilizer provider. The stock jumped 14.74% from its recommendation price of $62.42. The Canadian producer of nutrients, such as potash and nitrogen, also declared a quarterly dividend of $0.25 per share. Moten anticipated that, as prices for corn and soybeans rose, prices for the company’s fertilizers would improve.
PPG Industries (NYSE: PPG), which supplies the automobile industry with glass and protective and decorative coatings, showed a small jump of 5.75% trading at $54.43 per share compared to its recommendation price of $51.47. Moten was impressed with PPG’s commitment to slashing some $500 million in debt.
DuPont (NYSE:DD), another of Moten’s picks that relies heavily on the auto industry, was recommended at $40.08 and increased by 11.05%, climbing to $44.51 per share. Moten projected that Dupont’s corporate restructuring would bolster company earnings.
DuPont released in a statement in September that it expects 2003 earnings to be lower than Wall Street’s expectations. Earlier this year, analyst forecasts were $1.80 earnings per share. DuPont expects roughly $1.60 earnings per share.
Moreover, DuPont is facing a potential antitrust lawsuit, along with Monsanto (NYSE: MON), another one of Moten’s picks. Monsanto was trading at $16.17 a share at the time it was recommended and has since soared 53.06% to $24.75 as of September 2003. Farmers are accusing the two companies, which produce agricultural products such as seeds and herbicides, of fixing prices on soybean and corn seeds.
B.E. BLACK FUND INDEX
| Fund Name (Ticker) | 1-Year Ann. Total Return* |
3-Year Ann. Total Return* |
5-Year Ann. Total Return* |
Toll-Free Number |
Minimum Initial Investment |
| Ariel (ARGFX) | 30.00% | 14.90% | 14.83% | 800-292-7435 | $ 1,000 |
| Ariel Appreciation (CAAPX) | 38.65 | 12.45 | 13.74 | 800-292-7435 | 1,000 |
| Ariel Premier Bond Instl (APBFX) | 4.41 | 7.98 | 5.81 | 800-292-7435 | 1,000,000 |
| Ariel Premier Growth Inv (APGFX) | 29.79 | N/A | N/A | 800-292-7435 | 1,000 |
| Brown Cap Mgmt Balanced Instl (BCBIX) | 27.78 | -7.29 | 2.18 | 800-525-3863 | 10,000 |
| Brown Cap Mgmt Equity Instl (BCEIX) | valign=”middle”>35.71 | -12.18 | 1.36 | 800-525-3863 | 10,000 |
| Brown Cap Mgmt Small Co Instl (BCSIX) | 60.43 | -2.24 | 16.62 | 800-525-3863 | 10,000 |
| Edgar Lomax Value (LOMAX) | 26.78 | 1.88 | 3.23 | 866-205-0524 | 2,500 |
| Kenwood Growth & Inc (KNWDX) | 41.41 | 5.83 | 7.99 | 888-536-3863 | 2,000 |
| Lou Holland Growth (LHGFX) | 33.50 | -4.78 | 4.70 | 800-295-9779 | 250 |
| MDL Broad Market F/I (MBMFX) | .70 | 7.00 | 4.56 | 877-635-3863 | 500 |
| Profit Value (PVALX) | 41.09 | -7.60 | 8.04 | 888-744-2337 | 2,500 |
*AS OF OCTOBER 7, 2003. SOURCE: MORNINGSTAR INC.