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4-Star Stocks Poised to Pop: Dow Chemical

By Brian D. Pacampara, CFA – Updated Apr 6, 2017 at 12:34AM

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Market-trouncing returns could be written in these four stars.

Based on the aggregated intelligence of 135,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, chemical giant Dow Chemical (NYSE:DOW) has earned a respected four-star ranking.

With that in mind, let's take a closer look at Dow's business and see what CAPS investors are saying about the stock right now.

Dow facts

Headquarters (founded)

Midland, Mich. (1897)

Market Cap

$18.29 billion

Industry

Diversified chemicals

Trailing-12-Month Revenue

$51.78 billion

Management

CEO Andrew Liveris (since 2004)
CFO Geoffery Merszei (since 2005)

Return on Equity (average, last five years)

19.2%

Dividend Yield

3.65%

Competitors

DuPont (NYSE:DD)
Monsanto (NYSE:MON)
Huntsman (NYSE:HUN)

CAPS Members Bullish on DOW Also Bullish on

General Electric (NYSE:GE)
Johnson & Johnson (NYSE:JNJ)

CAPS Members Bearish on DOW Also Bearish on

Ford Motor
Bank of America (NYSE:BAC)

Sources: Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS.

Over on CAPS, 2,072 of the 2,188 members who have rated Dow -- some 95% -- believe the stock will outperform the S&P 500 going forward. These bulls include pauleckler and jed71.

Last month, pauleckler saw some signs that Dow is starting to motor: "As GM and Chrysler move toward reorganization and resumption of manufacturing, Dow should benefit. New car sales (and new housing starts) are major indicators of big volume chemical sales."

In a pitch from three weeks later, jed71 also informs Fools that Dow is slowly (but surely) getting over its buyout blues:

The Rohm and Haas purchase was a complete debacle. … The crisis in this company was at one point so strong, there was a small possibility that they may have been forced into bankruptcy … But not anymore.

Dow has correctly recognized they now have a large debt problem (duh!). … It will take some time, but Dow will successfully pay back the bridge loan and once again be prepared to grow its business.

The purchase of [Rohm & Haas] has enabled the company to become a growth company once more. They can leverage their existing customer base and have an expanded product line / offering beyond the commoditized chemicals. The margins captured on the newer lines are going to generate much higher profits / cash with much less volatility. This may not play out for a few years, but I do believe this will be a multi-bagger over time. $15 a share is a steal considering future growth and cash generation.

What do you think about Dow, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. More than 135,000 investors are waiting to hear what you have to say. CAPS is 100% free, so simply click here to get started.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Johnson & Johnson is a Motley Fool Income Investor recommendation. The Fool's disclosure policy always gets a perfect score.

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Stocks Mentioned

DuPont de Nemours, Inc. Stock Quote
DuPont de Nemours, Inc.
DOW
Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$31.73 (-2.37%) $0.77
General Electric Company Stock Quote
General Electric Company
GE
$64.55 (-1.24%) $0.81
Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$166.72 (0.33%) $0.54
E. I. du Pont de Nemours and Company Stock Quote
E. I. du Pont de Nemours and Company
DD
Monsanto Company Stock Quote
Monsanto Company
MON
Huntsman Corporation Stock Quote
Huntsman Corporation
HUN
$23.95 (-2.88%) $0.71

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

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