I've been analyzing the next energy growth areas and if there's any one company feeling the multiplier effect of the natural gas and shale fracking industries.
One potential area is the chemicals field, and one of the most prospective players is EI DuPont de Nemours & Co. (DD). At first, they don't appear to be part of this sector. But as I investigated them, it appears Zack's feels they're a beneficiary of low natural gas prices relative to their overseas competition:
"A string of factors are driving growth in the export markets including favorable energy costs stemming from the abundance of shale gas and strong demand from the emerging markets. Affordable natural gas and ethane (derived from shale gas) offer U.S. producers a compelling cost advantage over their global counterparts who use a more expensive, oil-based feedstock."
So DuPont gets a natural gasoline advantage over its international competition.
And there's a second boost to provide a nice double one-two punch for this stock: as global worries expand in Europe and Asia, this creates opportunities in American agriculture. This is a key area for DuPont, seeing as how they provide chemicals to the farming industry.
In fact, this scenario makes me think this stock could go gangbusters with long term returns no matter which way the global economy goes. Everyone needs crops for which farmers must buy fertilizer, herbicides, pesticides, and other DD products.
And no matter which presidential candidate gets into the White House this fall, they'll still press for domestic energy. Strong agricultural demand for chemicals coupled with low energy costs. Makes sense to me.
And here's another thing. DD has underperformed against the S&P 500 over the last eight months. If you at the charts generated by my system, DD hits a bottom late May with a nice bounce over June.
So what's my general assessment? This is a long term play where DuPont could surprise many. Chemical companies are well positioned to ride out the unpredictable markets over the long run. This is a good one for those who believe in the buy and hold mentality.
The biggest risks right now the company has foreign currency exposure due to its reduced earnings and increased cash flow volatility. More info here.
1. Market share and importance within the American economy as it is the 33rd largest company.
2. Diversification in industry since the 1980s.
3. Difficult to boycott in international markets due to its reach within various industries.
This is all according to Corporate Watch.