Similar to Dupont, I selected Eastman Chemical (NYSE: EMN) as a stock to avoid due to rising input prices and low margins. It is a simple formula that cannot be broken: If a company cannot pass along higher costs, it will make less.
The market has yet to grasp that concept with respect to EMN. The stock has more than doubled since bottoming in March and has skyrocketed during the second quarter. This is in stock contrast to the poor performance at Dupont.
The main difference here with EMN appears to be mostly management-related as the company seems to be better managing expectations. Dupont has suffered due to greater exposure to the housing sector and the auto sector.
In my opinion, there is no real underlying reason for the big move in EMN. In fact, I would be a seller of this stock given the significant run-up.
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