One of the stocks I have owned for a while is Huntsman Corp. (symbol HUN). The company is a specialty chemical manufacturer. For the industry, it is relatively small; the market cap is only 4.25 billion dollars. Right now, it is selling at under 9 times expected earnings for 2013, even though the stock has been moving up quickly in the last few days. Since the start of the year, the stock price has increased by 11.5%.
The performance of Huntsman has been outstanding this year, but I have to wonder if there is more coming. Here are three facts that make me wonder about it. Last Spring, the CEO of the company said in an investor presentation that he would consider selling the company since the market was undervaluing it. At the time, the stock price was just under $15. About a month or so later, there was a report that the company had hired the Bank of America to help it maximize shareholder value, a frequent way of saying that the company is on the block. A few days ago, the CEO and his son who is also an officer entered into agreements with the company that establish how they will be paid out should their employment end for a reason other than for cause. These agreements got little notice, but they say to me that a move to sell the company may be imminent.
Even without the hints at a sale, the company presents a good investment in my opinion. It happens to be in the part of the chemical field where product prices are rising for the most part. The low P/E multiple makes Huntsman undervalued.
In fairness, I have to disclose to readers that I have a substantial interest in this company. I also bought calls today to increase my leverage a bit. I bought the February 19 calls for 15 cents, and by day's end, they were bid 35 cents and asked 40 cents. It is rare that I invest in long calls; I like to have the erosion of time value working for me rather than against me. Nevertheless, I think it is possible that something big is about to happen with this company, so for a 15 cent investment, I increased my upside substantially.
NOTE: I want to emphasize that I am basically reading tea leaves with this one insofar as the sale possibility is concerned. Investing for that reason alone is highly speculative. Nevertheless, Huntsman is a good investment in my opinion even if the sale never occurs.
The performance of Huntsman has been outstanding this year, but I have to wonder if there is more coming. Here are three facts that make me wonder about it. Last Spring, the CEO of the company said in an investor presentation that he would consider selling the company since the market was undervaluing it. At the time, the stock price was just under $15. About a month or so later, there was a report that the company had hired the Bank of America to help it maximize shareholder value, a frequent way of saying that the company is on the block. A few days ago, the CEO and his son who is also an officer entered into agreements with the company that establish how they will be paid out should their employment end for a reason other than for cause. These agreements got little notice, but they say to me that a move to sell the company may be imminent.
Even without the hints at a sale, the company presents a good investment in my opinion. It happens to be in the part of the chemical field where product prices are rising for the most part. The low P/E multiple makes Huntsman undervalued.
In fairness, I have to disclose to readers that I have a substantial interest in this company. I also bought calls today to increase my leverage a bit. I bought the February 19 calls for 15 cents, and by day's end, they were bid 35 cents and asked 40 cents. It is rare that I invest in long calls; I like to have the erosion of time value working for me rather than against me. Nevertheless, I think it is possible that something big is about to happen with this company, so for a 15 cent investment, I increased my upside substantially.
NOTE: I want to emphasize that I am basically reading tea leaves with this one insofar as the sale possibility is concerned. Investing for that reason alone is highly speculative. Nevertheless, Huntsman is a good investment in my opinion even if the sale never occurs.
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