06-16-2021, 12:48 PM
(06-16-2021, 11:48 AM)fenders53 Wrote: [quote pid='26788' dateline='1623859546']Most people manage to lose money in commodity based stocks eventually. You have to follow the commodity and not chase too close to the end of the cycle. You have to know when to bail with a small loss and not get deer in the headlights hope mode. They just aren't buy and hold stocks. Averaging down is usually a bad call you make years too early. You can wait 5+ years hoping to get back to even. Not to mention they BK more often than about any other industry. You really do need to buy them when they are hated but missing the bottom by years is easy. Lumber is the one to watch now and learn. Futures are down 1/3 from peak. I don't think it is going to crash but I was not about to hold my WY too long. I caught the bottom and I did miss the top, but it quickly fell back to my sell price.
(06-16-2021, 10:55 AM)divmenow Wrote:(06-16-2021, 10:45 AM)Otter Wrote:You can throw all that out. They got hurt pre-pandemic and their plastic material business in on fire. They are just at the beginning. Bankruptcy in 2009 was a long time ago. There are 100's of same like companies that went through that and are trading at new highs. Just because they had issues in the past doesn't mean the future isn't bright.(06-16-2021, 10:29 AM)brought divmenow Wrote: New position in LYB
Fits my theme. Nice 4% dividend and PE under 20
LYB is in a strange spot right now, enjoying the increased pricing for its olefin/polyolefin products that make up more than half its revenues (brought on by global re-opening and supply chain disruptions), but is also pressured by the rapidly increasing costs of its input (crude oil), and may be facing long term pressure for its major revenue source, as many governments around the world seek to reduce the amount of plastic packaging/pollution.
Its average P/E ratio over 10 years is 9.85. So on a TTM basis it is 56% above its average P/E, and using FAST Graphs' blended P/E of 11 (incorporates future earnings estimates), it is 11.6% above its average P/E.
Prior to listing under its current ticker and raising its dividend for 11 consecutive years, Lyondell declared bankruptcy and wiped out all of its shareholders. It operates in an extremely low-margin business that can easily be disrupted by spikes in the price of crude, competitive pressure from foreign entities not subject to equivalent environmental/workplace regulations, and any substantial change to demand for its products. Bought some shares in the $60-70 range last year, and sold a bit over $100 a few months back. IME, companies like this always seem to crater right after releasing glowing quarterly reports about record profits and profit expectations (got burned by AA and FCX this way years back). Commodities and basic materials are rough.
There total debt right now is 0.23%. Very low. So the probably of them going bankrupt again is very unlikely. In fact CAT carries a higher debt and bankrupt probability at 39%
LYB posted profits of $1,070 million or $3.18 per share in first-quarter 2021, up from $144 million or 42 cents in the year-ago quarter. Earnings per share topped the Zacks Consensus Estimate of $2.65.
Revenues increased 21.2% year over year to $9,082 million in the reported quarter. However, the figure missed the consensus mark of $9,328.5 million. Consolidated EBITDA for the quarter more than doubled year over year to $1,585 million.
Their last bankruptcy in 2009 coincided with the last major oil price spike, and high debt loads. FWIW, FAST Graphs gives a debt ratio of 58%, and their S&P Credit Rating is BBB- (just one step above junk). The last time I dabbled in FCX, I have fond memories of buying in around $35, as all the articles were glowing and predicting a share price rally to $70 or more, and continuing dividend increases, then watching the share price crater to the single-digit to teens for five years, while the dividend got eliminated.
The boom-bust cycle of companies like LYB is familiar to anyone who has spent any appreciable period of time living and working in Houston. LinkedIn Profiles for employees of refining/plastics companies typically have interruptions that coincide with crude oil spikes, and then when crude craters, everyone working for the E&P companies gets fired as they go under or batten down the hatches.
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Commodities and basic materials are in my lowest circle of trust when it comes t predictable recurring revenues. They are the polar opposite of telcos and utes in that regard. Might as well consult the horoscopes as any quarterly earnings estimates