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The Dow Chemical Company Message Board

  • gdnyamate gdnyamate Apr 30, 1999 11:49 AM Flag

    Pump and dump

    Right, and now you have MSDW out there pounding
    the table on a stock that has risen 45% in the last
    three months and they only have rated "outperform"??
    Why not a "Strong Buy"?? They are inclined to raise
    thier price target from 120 to 150 (a must since the
    stock's now at 130) based on what??? Has MSDW raised
    earnings estimates? - not yet anyway, the highest yr2000
    est for Dow (out of 18 analysts who cover it) is
    still only $6.40 with a mean estimate of $5.60 (up
    about 6% in the last week). The fundamentals don't even
    come close to supporting this price, the only thing
    moving Dow Chemical stock higher now is momentum. So
    MSDW is pounding the table?? come on, give me a break
    ... this is the institutional version of "pump and
    dump".

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Dow has been out of favor w/analyst and
      institutional investors for several years now because of their
      inability to break even during the trough of the business
      cycle. Dow got killed during the last trough and analyst
      lost favor with Dow. In the last few years, Dow has
      seriously changed it's business model and actually made
      money during the 1st Qtr.99. Dow is quickly proving to
      analyst and institutional investors that it is not the
      same old company. I'll agree with you to some extent
      that the price is probably a little driven right now
      because of cash flowing into cylical stocks...but never
      before during cash infusions to cyclical stocks has Dow
      Chemical been such a favorite among institutional
      investors.

      • 1 Reply to mudahfukah
      • Don't take my post wrong. I think Dow is a fine
        company and usually it's stock is a good investment. They
        did have a very good 1stQ. I've owned Dow stock since
        1979 and in fact I still have some in a dividend
        reinvestment account though will disclose that as of yesterday
        afternoon (and more this morning) I am net short the
        stock.

        My beef is with the likes of Morgan Stanley Dean
        Witter who "pound the table" on Dow stock in what can
        only be (given the facts) an obvious attempt to push
        the stock higher so thier large accounts can sell.
        The fact is they only have Dow stock rated a "market
        outperform" not "strong buy". They raised to to Market
        outperform from "neutral" only last February. The stock has
        had a great run and is now over MSDW's original 12
        month price target of $120 (and did it w/in 2 months).
        What's changed (other than the stock price) since
        February to justify this sudden pounding??? First Quarter
        results have been out for more than a week now and still
        no publicized upgrade or upwards earnings revisions
        from MSDW just a bunch of hype that they managed to
        get in front of the public through CNBC. IMO they're
        really advising thier accounts to lighten up on any
        further strength.

        At it's core, Dow is a global
        basic chemical company. For sure there are some
        specialty and nice performance chemical niches but the
        fortunes of Dow (for the forseeable future) will swing
        with the global economy and the prevailing
        supply/demand dymnamics. This is basically the same Dow we've
        known for years. To its credit the present management
        team has been focused on putting together a business
        portfolio whos constituents are evaluated on thier ability
        to give a positive return on capital. This will help
        ensure that Dow as a whole remains competitive in the
        global market but will not change the cyclic nature of
        the business nor the underlying secular growth
        potential for basic chemicals.

        Even with a return to
        former growth levels in Asia, Latin America and Europe,
        the underlying long term global growth potential for
        basic chemicals is still only around 8-10%. Add in a
        nice consistent very dependable dividend of around 3%
        and you get a company that should be valued on
        average (on a price to earnings basis) somewhere in the
        low to mid teens. This obviously will rise and fall
        with the prevailing expectations for future
        performance. Which is where we find ourselves right now. What
        is the real potential for future earnings
        performance and is $130/share a reasonable price to pay for
        those earnings.

        to be continued ...

 
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