We have seen downgrades on Barrick Gold (ABX) for years. Many keep looking lower and lower, with som...
Tronox: Rebuilding Texas and Florida
09/18/2017 2:57 am EST
President Trump has promised aggressive action to rebuild Texas and Florida after two devastating hurricanes hit these states; many companies will benefit from the rebuilding process, suggests Mark Skousen, editor of The 1600 Alert.
One mining operation that will benefit is Tronox Limited (TROX), which specializes in titanium bearing mineral sands and titanium dioxide (TiO2) pigment in North America, Europe, South Africa and the Asia-Pacific region.
This mining operation provides mineral sands deposits used in the manufacturing of paint and other coatings, plastics and paper, as well as in various other applications comprising inks, fibers, rubber, food, cosmetics and pharmaceuticals. The demand for all these products will increase in the next year.
TROX beat estimates last quarter, and it will continue to do so. Revenues jumped 16% to $2.27 billion in the past year, with profits of over $48 million.
It has more than $300 million in cash, which is plenty to cover its long-term debt of $3 billion. The shares are selling for 28 times expected earnings per share in 2017-18, and it pays a small dividend.
Earlier this month, Tronox sold off its alkali chemicals business to Genesis Energy for $1.3 billion. Most of the proceeds from the sale of the alkali business will be used to fund the Cristal Tio2 acquisition. The sale also caused Standard & Poor’s to raise its rating on Tronox’s debt to B1.
Let’s buy Tronox Limited and set a protective stop of $18 a share. For the more adventuresome, consider buying the February $25 calls which last traded for $1.50 and expire on February 16th.
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