I have outlined why fundamentals look best at market highs, and worst at market lows. Just like we n...
Dupont’s Modern, Lucrative Look
06/16/2011 4:06 pm EST
This isn’t your parents’ chemical company anymore.
For example, EI du Pont de Nemours (DD), DuPont to its friends, got 28% of its sales in 2010 from its agriculture and nutrition segment. (That percentage will go up once DuPont integrates its acquisition of Danisco, the world’s second-largest producer of enzymes for biofuels and foods, in 2012.)
Of that, 59% comes from Pioneer Hi-Bred, the world’s largest seed company.
Another big hunk of sales come from what I’d called advanced materials. For example, 10% of sales in 2010 came from electronics, advanced display, and photovoltaic products.
Another 20% of sales fall into the performance materials unit, which produces such things as engineering and industrial polymers. Safety and protection fibers, such as Kevlar, account for 10%.
And where DuPont is still in what I’d call the "traditional" chemical business, the company has been very good at picking its spots. So, for example, DuPont is the second-largest producer of titanium dioxide pigments, used in coatings and paper.
That might seem like a humdrum business, but producers are operating near capacity in the face of continued high demand from Asia, with no new capacity scheduled to come online until 2015. That has let DuPont raise prices and raise them again—eight times—during the global economic recovery.
I think this combination of businesses should enable DuPont to grow revenue by 10% in 2011, and after. Many of these businesses—advanced materials, enzymes, seeds—have extremely good long-term growth prospects.
That’s one reason that I added these shares to my Jubak Picks 50 long-term portfolio back on January 18. (I’m just getting around to filling in the details on that pick today.)
The stock traded at $48.96 on January 18. It opened today, June 16, at $49.41, a nice discount from my 12-month target for these shares of $60. Also, the stock pays a 3.3% dividend.
Full disclosure: I don’t own shares of any of the companies mentioned in this column in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund (JUBAX), may or may not now own positions in any stock mentioned in this column. The fund did own shares of DuPont as of the end of March. For a full list of the stocks in the fund as of the end of March, see the fund’s portfolio here.
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