COMPANY DESCRIPTION

The Dow Chemical Company (Dow or ‘the company’) is one of the largest chemical companies in the world. It provides chemicals, plastics, agricultural products, feedstocks, and electronic and functional materials. The company primarily operates in the US, Europe, Middle East and Africa. It is headquartered in Midland, Michigan 

 

ECONOMIC MOAT

In our opion Dow Chemical does not have an economic moat.  It success is driven by superior execution.  The basic chemical business is characterized by low barriers to entry, high capital intensity, and steep cyclicality, making it difficult for basic players to earn their cost of capital over a full economic cycle.

 

OUTLOOK

Weakness in the global economy should continue to present challenges, and we expect further volatility in commodity markets. On the bright side, tightening supply and demand is acting to offset some of the challenges that are a result of falling oil prices. We think the company will continue to earn healthy returns from sectors less susceptible to weakness in commodity prices. Long-term prospects look more favorable. This timely issue offers worthwhile total return potential for the coming years, thanks to the healthy dividend yield.

CLICK THE BULL TO RETURN TO RESEARCH HOME PAGE

STRENGTHS

  • Varied businesses from specialty chemicals to agrochemicals and geographically diversified revenue stream

  • Strategic joint ventures helping Dow in enhancing its product portfolio 

WEAKNESSES

  • Reliance on suppliers increasing dependency risk

  • Involvement in legal tangles affecting financial results 

THREATS

  • Environment compliance costs could affect margins

  • Stringent regulations could affect profitability

  • Intense competition from major oil companies may have a negative impact on the company's results of operations 

OPPORTUNITIES

  • Investments in the US Gulf Coast likely to strengthen the company's feedstock and help in its downstream business

  • Divesting non-core assets likely to help the company accelerate its value creation

  • Expansion of polyolefin encapsulant films capacity 

The above report is for information purposes only, and is not a solicitation or offer to buy or sell any securities. Past performance is no guarantee of future performance. Neither diversification nor asset allocation ensures a profit or guarantees against loss. Before investing, investors should consider their risk tolerance, investment objectives, time horizon, available capital, and charges and expenses.  

 

The information presented in this report has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guranteed. All material is subject to change without notice. The views and opinions expressed are those of Focused Stock Research and/or WALT ST Investment Management, Ltd. and in no way reflect the views and opinions of Investment Consultants nor their Broker Dealers.

$65