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A Big Upgrade for Dow Chemical

By Dave Mock – Updated Apr 5, 2017 at 9:02PM

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This bullish call comes from more than just one analyst.

Every day, the sun rises on Wall Street, and a plethora of professional analysts wake to issue new opinions on stocks. Here at the Fool, we use our "This Just In" column to examine some of these picks -- and the track records of the firms behind them -- so individuals can make better investing decisions.

In addition to following these professional banks, anyone can use Motley Fool CAPS to monitor the collective opinions of more than 115,000 members, many of whom demonstrate better investing insight than published analysts do.

Lately, enough top-performing CAPS members have turned bullish on Dow Chemical (NYSE:DOW) to upgrade it from its long-held four-star rank to the tippy-top five stars. A total of 1,207 investors have given their opinion on Dow Chemical, with many offering analysis and commentary explaining their recent optimism.

Many investors appreciate Dow's global diversity; like other companies such as United Parcel Service (NYSE:UPS) and 3M (NYSE:MMM), the two-thirds of Dow's revenue that comes from abroad has helped buffer the company during the economic downturn. Dow is also diversifying across segments -- the company is looking to enter the high-margin specialty chemicals business with the purchase of competitor Rohm & Haas.

Dow is paying a hefty 74% premium for Rohm, but figures the merged company will help it better face main competitor DuPont (NYSE:DD). Dow also expects to benefit from big cost savings once the deal is complete. Several big names have confidence in the deal, too: Warren Buffett's Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) is making a $3 billion investment, and major investment banks including Citigroup (NYSE:C) are loosening their purse strings and making big credit commitments as well.

Dow's revenue rose 24% in the second quarter, but rising energy and raw materials costs are eating into profits. But CAPS investors are even more bullish now. Maybe it's the fact that Dow plans to raise prices and institute freight surcharges to offset rising costs. Or it could be the juicy 4.9% dividend yield coupled with a forward P/E of 11.7. Either way, nearly 94% of CAPS members rating Dow Chemical expect it to outperform the market into the future.

To see what the very best CAPS analysts are saying now about Dow Chemical -- as well as other winning stocks they are picking -- head on over to CAPS and have a look. It's free and easy.

More Foolishness:

The Motley Fool Income Investor service scours the market for solid investments paying investors money to hold shares, such as picks Dow and UPS. See which dividend-paying companies the team is recommending today with a free 30-day trial.

Fool contributor Dave Mock upgraded every bike he owned with reflective tape and streamers tied to the handlebars. He owns shares of 3M. Berkshire Hathaway and 3M are Inside Value selections. Berkshire Hathaway is also a Stock Advisor pick and The Motley Fool owns shares. The Fool's disclosure policy looks good in a lei and hula skirt.

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Stocks Mentioned

DuPont de Nemours, Inc. Stock Quote
DuPont de Nemours, Inc.
DOW
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$404,485.25 (-0.22%) $-889.76
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$267.77 (-0.28%) $0.74
Citigroup Inc. Stock Quote
Citigroup Inc.
C
$44.26 (-2.90%) $-1.32
United Parcel Service, Inc. Stock Quote
United Parcel Service, Inc.
UPS
$164.33 (-2.10%) $-3.53
3M Company Stock Quote
3M Company
MMM
$112.99 (-1.01%) $-1.15
E. I. du Pont de Nemours and Company Stock Quote
E. I. du Pont de Nemours and Company
DD

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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