LyondellBasell Industries N.V. operates as a manufacturer of chemicals and polymers, refiner of crude oil, producer of gasoline blending components, and developer and licensor of technologies for production of polymers.
The below chart shows an uptrend of 94 weeks between 2013-2014, break out to peak, for a total of 50 points.
The pattern has since moved into a long triangle consolidation phase, pulling back a perfect 61% FIB of the up move.
Based on FIB projections and a squaring of price and time, I expect this consolidation phase to continue deep into 2016; ending between the weeks of June 24th thru 30th, giving the stock 94 weeks of consolidation, squaring with 94 weeks of upside between 2013-2014.
The trend is your friend, a popular saying on Wall Street. As the stock moved UP 50 points into the consolidation phase, expect the stock to move 50 points UP out of the consolidation; giving us a price target of $160 PER SHARE.
LYB trades at just under 10xs p/e. Forward projections predict a p/e of just over 9xs. In other words, the street is expecting 10% growth or less; which I consider overly pessimistic.
LyondellBasell's third quarter operating income in the Americas shrunk significantly from last year, declining from $1.07 billion to $740 million. However, the company's Europe, Asia and international operating income spiked from $223 million up to $412 million--ALMOST A DOUBLE.
During the latest reporting period, short interest levels exploded on chemical stocks like Dow Chemical Co (DOW). LYB shares trade at a 50% discount to it's peers with companies like Dupont trade north of 20xs. LYB short days to cover are currently 3.46 days; compared to the S&P of 3.92 days to cover.
The XLB ETF however saw an inflow of $81 million week over week. while individual names in the XLB are being targeted by shorts as over valued, the sector as a whole is seen favorably.
LYB is a cash printing machine with an ROE of 50%, substantially higher then the S&P or it's peers. The companies management keeps returning this cash flow to shareholders with buybacks and dividend increases. The last divvy increase was almost 11%.
With substantial cash generation, cheap valuations compared to peers, an expected mild winter which will be favorable on fuel cost, and a technical pattern set to explode higher, I have no problem collecting a nice divvy for the next 8 months while waiting for the stock to explode $50 points higher.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.