Shin-Etsu Chemical Leading Its Peers For Good Reasons

Large chemical companies with mid-teens operating margins aren't very common, but Japan's Shin-Etsu (OTCPK:SHECY) has managed it for some time and that has helped the stock outperform both the Nikkei and the S&P 500 over the last five years. With leading positions in PVC, silicones, and multiple markets serving the semiconductor space, I believe Shin-Etsu is looking at a relatively favorable revenue and margin outlook for at least the next few years.

With both the Tokyo-traded shares and the ADRs up around 70% over the last year, a lot of the positives about this company are in the stock. That said, the shares don't look particularly expensive on a DCF basis and improving conditions in the wafer market could drive some near-term upside. I'd rather see a better entry price, but Shin-Etsu's all-around quality argues for a spot on a watch list, and I wouldn't be in a rush to sell if I owned the shares.

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Shin-Etsu Chemical Leading Its Peers For Good Reasons

Seeking Alpha: Waiting For The Grass To Grow At S & W Seed Company

The wait goes on for S&W Seed Company (NASDAQ:SANW) (or "S&W") to prove its merits as an under-followed player in the ag space. The shares are down another 17% from my last update, about flat over the last year, and down 40% over the past two years. Weak as that may be, S&W has actually outperformed Monsanto (NYSE:MON) since June and over the past year, as there's been a sharper reaction to Monsanto's negative revisions.

Not a lot has changed from a fundamental perspective since last June, though a disappointing harvest in 2015 is going to have near-term repercussions on margins. The key debate around S&W, at least in my thinking, remains whether the company can successfully shift farmers from public/generic seed varieties and share in a larger proportion of the value created by its yield-enhanced and other proprietary alfalfa seed varieties. My low double-digit annualized revenue growth estimate is hardly conservative, but S&W could achieve it with a combination of low single-digit acreage growth and an improvement in value capture from less than 10% to less than 20% - still well below the 25%-plus that Monsanto and DuPont (NYSE:DD) can reliably get from their corn and soybean varieties.

If S&W can do it, and achieve a long-term gross margin above 30% and a long-term operating margin in the mid-teens, a fair value of over $6 still remains in play after a recent dilutive financing.

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Waiting For The Grass To Grow At S & W Seed Company

Seeking Alpha: Monsanto Making Do, But It's M&A That Everyone Seems To Want

Given the recent announcement of the intention of DuPont (NYSE:DD) and Dow (NYSE:DOW) to combine their operations and Syngenta's (NYSE:SYT) apparent increased willingness to at least consider M&A offers, the question of consolidation in the ag business seems to have rendered Monsanto's (NYSE:MON) near-term performance largely moot. Given the weakness in the ag sector, and ongoing softness in corn prices, that might not be such a bad thing.

I continue to believe that Monsanto is a solid long-term holding in the ag space. The stock is modestly undervalued and carries less operating risk than many cheaper-looking ag stocks. I also continue to believe that Monsanto will find a seat in this game of ag musical chairs, but there is definitely a risk that Monsanto either has to settle for something less than its first choice (or second...) or pay more than it would like to.

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Monsanto Making Do, But It's M&A That Everyone Seems To Want

Seeking Alpha: In A Bad Ag Market, Can Monsanto Do Enough That Matters?

Monsanto (NYSE:MON) wasn't the first to feel the pinch from the negative ag cycle, and it certainly hasn't suffered the most, but weak grain prices have nevertheless done their damage. Monsanto's shares are down about 10% from my last update, and about 20% over the last year, as investor expectations and analyst targets have dropped significantly in the face of weak crop pricing and pinched farmer budgets.

There's always a big "but" that goes with forecasting the results for any ag-sensitive company and that is the unpredictability of the underlying market; a really bad (or good) crop could shift prices dramatically and change MON's operating environment quickly. That said, a lot of those fluctuations even out over time, and I believe the company's deep, high-quality R&D operation is a strong source of future value.

My expectations for Monsanto were lower than the Street's prior to this most recent reckoning, so my revisions are correspondingly more mild. I still expect MON to be a 10%-plus long-term grower, supporting a $105 fair value today and maybe some upside if a deal for Syngenta (NYSE:SYT) or another strategic target materializes.

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In A Bad Ag Market, Can Monsanto Do Enough That Matters?

Seeking Alpha: S & W Seed Has A Huge Opportunity, But The Ability To Execute Is The Key Risk Factor

I suppose it would be easy to blame S & W Seed's (NASDAQ:SANW) ongoing share price weakness on the overall malaise in the ag sector. The shares are down another 15% or so from when I last wrote about the company, but at their worst they were down closer to 50%. That's not just "well, it's a tough market"; S & W has made more than a few mistakes, leaving the Street to wonder if management can really execute on what seems like a robust opportunity in the alfalfa market.

The acquisition of DuPont's (NYSE:DD) alfalfa business should mark a major point of transition for the business, as it brings immediate credibility and scale to the company in the dormant alfalfa variety market (80% or so of the U.S. alfalfa market and 50% of the world market). What's more, the company's commitment to improved varieties of alfalfa seed (GM and others) should lead to more pricing power. But it all comes back again to the question of execution.

I believe the market opportunity can support high teens annualized revenue growth and operating margins in the mid to high teens over the long term, but that's a lot of benefit of the doubt for a company that thus far hasn't earned it. That's how it is with emerging companies, though - if you want to get in early and get the really big long-term gains, you have to accept an elevated risk; by the time the question of management's ability to execute (and/or whether the alfalfa market can be what I believe it can be) is answered, the opportunity to get in at a low price will be gone.

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S & W Seed Has A Huge Opportunity, But The Ability To Execute Is The Key Risk Factor

Seeking Alpha: Strong Soy And A Deep Pipeline Supports Monsanto

Investors have unquestionably grown more and more concerned about the ag sector over the past 12 months. Corn and soybean prices have rebounded from the end of September, but soy prices in particular are well below the year-ago levels. With less profitable insurance levels likely for 2015, planted acres may well come under pressure and some farmers may be tempted to skimp on seed traits as a way of saving money.

That's not a great backdrop for Monsanto (NYSE:MON), but I continue to believe that Monsanto will be hurt less than rivals like DuPont (NYSE:DD) and Syngenta (NYSE:SYT). Increasing competition is a risk, as the Chinese have approved traits from Syngenta, Bayer, and Dow's (NYSE:DOW) delayed launch of Enlist will most likely eventually become a full launch (albeit not until 2016).

What Monsanto continues to have in its favor is a meaningful yield advantage that supports its value proposition to farmers, not to mention a deep pipeline of traits targeting disease resistance, yield enhancement, and other productivity initiatives. Add in the potential of precision ag/analytics, biologicals, and RNAI-based products, and there is still a valid argument for Monsanto as a long-term holding even if the next year or two are more challenging.

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Strong Soy And A Deep Pipeline Supports Monsanto

Seeking Alpha: Monsanto Looking To Balance The Near-Term And Long-Term Opportunities

I don't think it's unfair to ask if Monsanto (NYSE:MON) is running out of rabbits to pull out of its hat to satisfy the notoriously short-term attention spans of the Street. The Brazilian launch of Intacta has gone well, the company's Climate Corp offerings are off to a good start, the company maintains an impressive lead in trait development, and has multiple long-term opportunities like dual-stack soybeans, microbials, and biocides. Yet, the company no longer posts big quarterly beats and expectations for next year have come down due in part to weaker fundamentals in the corn market.

I believe it's a matter of perspective. For long-term investors, I don't think there's a better ag company out there, and I expect Monsanto to widen its lead in the seed/traits business, add new opportunities to its productivity/protection business, and really make the most of its Climate Corp offerings. In the short term, though, the shares have held their own with DuPont (NYSE:DD) and Bayer (OTCPK:BAYRY) and beaten Syngenta (NYSE:SYT), but the going may be getting a little tougher.

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Monsanto Looking To Balance The Near-Term And Long-Term Opportunities

Seeking Alpha: Taminco Should Be Switching Over To Cash Generation

The ag chemical market has slowed, as seen recently at FMC (NYSE:FMC) and DuPont (NYSE:DD), but Taminco's (NYSE:TAM) strong market share and diverse end markets for its alkylamine products are serving the company pretty well. The shares have done okay since my mid-February write-up, rising about 10% and doing pretty well relative to direct rivals like DuPont and BASF (OTCQX:BASFY) and the Dow Jones Specialty Chemicals Index. I continue to believe that Taminco is a solid specialty chemical company with better growth and return on capital prospects than its peers, not to mention deleveraging potential, but the valuation is creeping up a bit and this looks more like a "buy on weakness" than outright buy right now.

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Taminco Should Be Switching Over To Cash Generation

Seeking Alpha: S&W Seed Company Still Building Toward Big Things

Sometimes it's better if a company can do what it needs to do without investors flipping out over every quarterly report or speculating on long-distant product opportunities. I believe that is particularly true in the case of agriculture, where it is pretty much impossible to accelerate the growing seasons and where companies deal with a customer base that is notoriously stubborn and risk-averse.

That brings me back around to S&W Seed Company (NASDAQ:SANW). This company had a pretty exciting 2012 and 2013, due in part to enthusiasm over the company's efforts to grow stevia but also do to general excitement over most things in the agricultural sector. With less bullishness in ag stocks, as well as setbacks in the stevia efforts and investors realizing that a shift toward new alfalfa seed varieties wasn't going to happen in a couple of quarters, the shares have settled down to a +/- 10% range in 2014. While there are still valid questions as to whether the company's efforts to expand into dormant varieties and introduce new tropical, salt-tolerant, and Roundup Ready seeds, I think this is still an interesting long-term opportunity.

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S&W Seed Company Still Building Toward Big Things

Seeking Alpha: BASF Has Lagged On A Relative Basis, But Excels On Its Own Merits

Chemical companies have been basking in some investor love, as companies like Dow Chemical (DOW), Wacker Chemie (OTC:WKCMY), Clariant (OTCPK:CLZNY), and DuPont (DD) have seen their shares rise from 26% to 53% over the past year. With that, the "fair" multiple on sales and EBITDA has risen more than 10% as investors bid up companies that are exposed to global growth and have succeeded in restructuring operations away from basic/commodity markets.

BASF (OTCQX:BASFY) is a tricky stock within that context. BASF is the largest chemical company in the world and a top player in numerous markets. The company also has above-average profitability despite a sizable ongoing commitment to R&D. Despite that, the shares have lagged, as the local shares (BAS.XTA) have risen less than 20% over the past year. Stretch out the comparisons to two or three years, though, and BASF's performance is much more competitive - suggesting that BASF was simply early in getting recognized for its qualities. BASF as a lot of positives from a qualitative standpoint, but it's tough to argue the shares are undervalued unless you believe that it's somehow "different this time" for chemical companies.

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BASF Has Lagged On A Relative Basis, But Excels On Its Own Merits

The Motley Fool: Monsanto Company's Balanced Growth Proves Stronger Than the Headwinds

Agricultural productivity giant Monsanto (NYSE: MON  ) has faced a slightly higher wall of worry here of late. Calendar 2013 was an operationally strong year for the company and one that largely put to rest questions of the company's ability to recapture momentum from DuPont (NYSE: DD  ) . For this quarter, though, there were worries that poor weather, difficult comps, and lower plantings were going to stall out the company's growth.

Analysts needn't have worried, as Monsanto once again delivered a better than expected quarter. With significant near-term opportunities in both corn and soybeans and longer-term opportunities in biologicals/microbials and precision agriculture, there are both growth and value catalysts to keep this stock moving.

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Monsanto Company's Balanced Growth Proves Stronger Than the Headwinds

Seeking Alpha: Taminco Isn't Your Typical Chemical Company

Specialty chemicals is a sector label that really doesn't tell investors all that much, as it includes a wide range of companies with very different end-markets and operating characteristics. That said, specialty chemicals do usually stand out as having above-average full-cycle returns than more commodity-oriented chemical companies. With that backdrop, I think Taminco (TAM) is worth a closer look as a pretty special specialty chemical company.

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Taminco Isn't Your Typical Chemical Company

Seeking Alpha: KMG Chemicals Hopes To Leverage Chip Turnaround And Synergies

KMG Chemicals (KMG) is a small player in the specialty chemicals space, with only about $350 million in annualized revenue and about half that amount of market cap. Despite this limited scale, KMG is a significant player in parts of the electronic chemicals and wood treatments markets. Improvements in the consumer electronics market, coupled with synergies from the acquisition of a business from OM Group (OMG) should drive improving results in the coming years, and management is hoping to augment this with the acquisition of a third standalone unit.

KMG Chemicals has established sizable market positions in its targeted markets, but it is not so clear that those are valuable markets for the long term. With that, KMG's financial performance has been erratic and the stock is barely followed on Wall Street. I'm optimistic that a turnaround in the chip space, coupled with merger synergies, can drive better near-term performance but investors need to consider the ramifications of the company's preference to focus on established markets when evaluating this as a potential long-term holding.

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KMG Chemicals Hopes To Leverage Chip Turnaround And Synergies

The Motley Fool: Monsanto Company's Pipeline Is The Real Draw Today

Agribiotech Monsanto (NYSE: MON  ) is always going to be a lightning rod for criticism and scrutiny -- well, more so than other seed trait and chemical companies like DuPont (NYSE: DD  ) , Syngenta (NYSE: SYT  ) , and Dow Chemical (NYSE: DOW  ) . Even so, the company's significant sustained yield advantages and its deep, expanding pipeline make it a company and a stock well worth watching. Should the company's more recent efforts in RNA interference, integrated farming planning/management, and biologicals pay off, there could appealing upside to today's price.

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Monsanto Company's Pipeline Is The Real Draw Today

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.

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Axiall Stuck In A Commodity Tug Of War

Seeking Alpha: OM Group An Interesting, Still-Evolving Story

OM Group (OMG) is another one of those "blast from the past" stocks for me. I have owned this own profitably more than once, with multiple opportunities to buy and sell provided largely by the historical volatility in the company's cobalt operations.

Today OM Group is a very different company. The volatile cobalt operations are gone, and the company is focused specialty chemicals and materials company with good global share in specialty batteries and magnets. Better still, OM Group has a clean balance sheet and is still of a size where small strategic acquisitions can make a real difference.

OM Group is not the cheapest stock out there, having risen almost 80% over the past year on Wall Street's enthusiasm for the evolution towards a cobalt-free specialty chemicals/materials company. Although I do believe weakness in Europe (a major market for the magnetic technologies business), electronics, and defense could be challenges for a couple of quarters, and the shares are not cheap enough to be an enthusiastic buy, this is a stock worth some due diligence today and a spot on watch lists.

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OM Group An Interesting, Still-Evolving Story

Seeking Alpha: Still Time To Think About Going All-In On Axiall

Even with my dedication to the philosophy of "enlightened torpor" with respect to changing up my portfolio, there are times where it's worthwhile to consider secular trades or themes. While many stocks have already enjoyed a pretty good run on the back of improving expectations for the U.S. housing market, there are still a few ideas left that hold potential.

One of those ideas to consider is Axiall (AXLL) - the new chlor-alkali giant that has emerged from the combination of Georgia Gulf and PPG's (PPG) commodity chemical business. Investors and analysts wigged out in response to higher-than-expected ethylene prices in the first quarter, but the company's outsized exposure to U.S. housing, potential PVC margins, and synergy possibilities make this a name still worthy of consideration. As it is a commodity chemical, though, investors should realize that this is a consummate example of a stock that is bought to be sold - this is not a stock I'd imagine many investors would want to hold for a decade at a time.

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Still Time To Think About Going All-In On Axiall

Seeking Alpha: A Window Of Opportunity At S & W Seed

When I wrote on S&W Seed Company (SANW) back in March, I was quite bullish on the prospects for the company, but relatively cautious on the stock due to very aggressive sell-side expectations and a big run in the stock. Since then, the stock has taken a few knocks as the company's fiscal third quarter earnings weren't great, the stevia business saw a big setback, and investor enthusiasm for all things ag has waned. While there's still ample execution risk here, and the scant sell-side coverage is arguably too aggressive with its targets, I think the valuation is pretty interesting for more aggressive investors.

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A Window Of Opportunity At S & W Seed

Investopedia: Monsanto Has Eased Off, But Still Not Cheap

Monsanto (NYSE:MON) generates a huge volume of press and public interest, but the reality is that the public bickering about GM crops has very little quarter-quarter impact on the decisions that farmers make in the U.S. and Latin America. The bigger issue for Monsanto, frankly, is that crop plantings seem to be coming in lower overall than expected and more of the earnings story revolves around the volatile and unreliable herbicide business. Though I continue to see Monsanto as a core holding, expectations for this company are not what I'd call conservative and investors may want to see how this apparent reallocation away from ag stocks plays out before stepping in to buy.

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Investopedia: Why Is Monsanto Evil, But DuPont Isn't?

As I explored almost a year ago in the case of Wal-Mart (NYSE:WMT) and Amazon (Nasdaq:AMZN), public perception is a curious thing. Two companies can do many of the same things, and yet one will take a much larger amount of flack and criticism for it. Or, as the Seattle Organic Restaurants website says, “the difference between a rainforest and a jungle is that a rainforest has a PR agent”.

To that end, I find it very interesting that Monsanto (NYSE:MON) is one of the most-hated companies on the planet, with the internet and social media full of stories and passed-around memes that declare it to be one of the worst companies in the world. And yet, DuPont (NYSE:DD) is just as big in genetically-modified seeds and agricultural chemicals, and pursues largely the same policies as Monsanto with respect to pricing, IP enforcement, and so on.

So it merits the question – Why is Monsanto evil, but DuPont isn't?

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http://www.investopedia.com/articles/investing/061913/why-monsanto-evil-dupont-isnt.asp