Monday, January 6, 2014

Seeking Alpha: Axiall Stuck In A Commodity Tug Of War

I have little use for beta as a measure of risk, but it is a good measure of volatility and Axiall's (AXLL) beta of over 3.0 (against a comp group of Westlake (WLK), Dow Chemical (DOW), and Olin (OLN) that ranges from 1.1 (Olin) to 2.4 (Westlake)) underscores how vulnerable these shares are to prevailing prices and sentiment for caustic soda, natural gas, ethylene, and so forth. That leads me to conclude that the market moves these shares a great deal more on the basis of what is happening right now in the chemical markets and much less on the basis of what could happen as the company reaps further synergies from the businesses it acquired from PPG (PPG) and the North American housing market continues to recover.

This makes Axiall a challenging stock. Although it has done okay since my original recommendation on July 10, the PVC industry hasn't seen the sort of demand that was expected during the summer of last year. These shares appear to be more or less fairly valued on the basis of near-term results, though I continue to believe there is double-digit upside for those willing to hold in the hopes of a housing-led improvement in the PVC market later in 2014.

Continue to Seeking Alpha here:
Axiall Stuck In A Commodity Tug Of War

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