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RA448
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Individual investor. Converted my 401k to a brokerage IRA in August 2011 and used my free time watching, and profiting from, the volatility of the stock market. Including dividends, the account went from $113,000 to $127,000 in just 5 months, about a 30% annualized return. As of February 2012,... More
  • Kronos Worldwide-You Need And Use Their Products Every Day 1 comment
    Mar 27, 2012 2:57 PM | about stocks: KRO

    Today I want to examine Kronos Worldwide ("Kronos (NYSE:KRO)". KRO is a global producer and marketer of titanium dioxide pigments, also known as TiO2. This compound is used in more things than you can throw a stick at. Things such as coatings, plastics, paper, inks, food and cosmetics. The company specifies its main product in their web site URL: kronostio2.com.

    Though this is well known, what is not so well known is that NL Industries ("NL Ind. (NYSE:NL)"), owns a significant but non-controlling stake in KRO.

    KRO has products that no one on earth can live without-literally. Ever wonder how your toothpaste looks so white? TiO2. How about that gloss white paint you just bought for your home improvement project? TiO2. TiO2 has been called the perfect white and the whitest of white. KRO produces several variations of this pigment for different uses. It's not alone in this space. E.I. du Pont de Nemours ("DUPONT (NYSE:DD)") is the big boy in this space and one of the largest chemical companies in the world.

    But KRO need not worry about DUPONT and other smaller players in the TiO2 space-at least for now. Demand for this specialty chemical keeps rising, as does production. All of the producers of this chemical recently announced price increases and they're expected to stick, as they have done in the past. This is partly due to plant closures and decreased production over the last few years, creating a supply imbalance favoring producers. Even though this one product represents about 90% of their sales, KRO should continue to profitably compete in this space.

    KRO is a well run company. The stock currently trades at a 9 P/E and sports a dividend yield of 2.5%. The company has a history of raising dividends, as it did in June 2011 from 13 CPS to the current 15 CPS.

    My only concern is paying too much for the stock. It's trading at about $22. to $24., well off the 52 week high of $34.50. You could purchase KRO on a dip and pay $19. to $21. per share, a range already seen this calendar year. Buy the stock for $20.00, hold onto it, collect the (now 3%) dividend and the price could easily rise to $30.00 within the next 12 months, giving you a total return on your investment of about 53%.

    Barriers to entry in this space are high, as the product must first be mined and separated from mined material, then refined through a complex chemical process. However, a price war could hurt KRO and the other players.

    There is currently no viable substitute for TiO2. I believe that those who short the stock will be disappointed. Though reports of a slowdown in Europe point to decreased demand, selling a product that goes into things that everyone needs should provide support. This makes the risk/reward ratio about 2-to-1 in favor of KRO. I'm speculating here but the risk/reward is tilted even more in favor of the company when you throw in the possibility of a takeover, an offer that could easily be $40.00 or higher.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in KRO over the next 72 hours.

    Themes: Titanium Dioxide Stocks: KRO
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  • tuliptown
    , contributor
    Comments (913) | Send Message
     
    been down to $14 and with the earnings announcement coming, do you have any update on KRO now?
    5 Aug 2012, 04:36 PM Reply Like
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