Du Pont reported better-than-expected Q2 earnings, but the report nevertheless did not overwhelm institutional investors, who've granted the company only a modest P/E of 14. Even so, I'm Reiterating my Buy rating for E.I. du Pont de Nemours & Company (NYSE: DD), first recommended on April 22, 2009 at a price of $27.74. Here's why:
The headwinds from the global recession will begin to lessen in Q3, boosting DD's agriculture and pharmaceutical-related businesses (the picture is less clear, however, for its chemicals business).
In particular, as emerging market food demand ramps, look for institutional investors to begin to reposition themselves in soybean/corn seed suppliers in 2009/2010, which also should aid Du Pont's shares. The First Call FY2009/FY2010 EPS estimates for DD are $1.79 to $2.01.
Stock Analysis: Du Pont is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in DD now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your DD position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $13.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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