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Olin's Stock Price Presents Opportunity

Dec. 04, 2018 7:32 PM ETOlin Corporation (OLN)7 Comments
Faloh Investment profile picture
Faloh Investment


  • Following my warning on Olin Corp. in 2017, the stock's rally continued, before cratering to 33% below the price I encouraged investor caution at.
  • The business is positioned well and continues to offer a regular quarterly dividend just as it has for 92 consecutive years.
  • Today's price appears to be right on the nose of my forecast owner earnings for the business, and I think there's potential here for investment with a long-term horizon.

Back in 2017, I pointed out the then price of Olin Corporation (NYSE:OLN) at $30.83 was trading at a substantial premium to the fair value I pinned on it, concluding the article with:

although the stability in this name is welcome the stability doesn't also justify the large premium to fair value asked today.

Long-term investors in OLN may enjoy modest growth in their dividend but it's likely to be coupled with capital loss as I believe OLN will be repriced soon.

I rate this an avoid especially for new buys.

Source: Olin Too Expensive!

Today, the common stock has dropped over 40% and the company is trading at $21.63 for a $3.51 billion market capitalization, from a high of $38.84 set at the beginning of the year.

Now, a few weeks of price stability has investors asking whether or not the stock is consolidating on strength or weakness. I believe the times are highly uncertain for the company because its income is dependent on continuously robust U.S. and international industrial activity. However, the stock has come down in price to such a degree that there appears to be a long-term opportunity here.

The Big Picture For Olin

Since its 2015 acquisition of Dow Chemical's chlorine business is fully integrated by this time, the company has returned to its classic no-growth position. Every incremental gain or loss for the business from here on out is likely to come purely from the pricing of its primary and derivative chemical products. This puts us, as investors, in a position to pick a confident position relative to Olin because we can simply judge whether or not forecasted earnings are likely to generate a return we are satisfied with. More on the potential returns below under the heading "Stock Valuation".


The company's 4th quarter dividend of $.20

This article was written by

Faloh Investment profile picture
I was the first guy to call GE is a sell. Check my Author's Picks for more interesting things.Please visit my profile and become a Real-Time Follower today. "Common sense is not so common."                                           -Voltaire

Analyst’s Disclosure: I am/we are long OLN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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