As expected, Ashland is starting to deliver

Posted Aug 28th 2009 2:15PM by Joseph Lazzaro
Filed under: Stocks to Buy

Right now, it's all about Ashland: I'm Reiterating my Buy rating for Ashland (NYSE: ASH), first recommended on May 4, 2009 at a price of $26.03. If you purchased then, you're up about 40%. Not bad, for an economy that's just starting to pull out of a recession.

Ashland makes specialty resins, polymers, and adhesives for sale in North America and Europe. It also owns the Valvoline oil-change brand and oil service chain, and the Zerex anti-freeze brand, among other business operations.

As noted, the above business strengths, combined with logistics efficiencies, and superior marketing in consumer markets, make ASH a bargain. To be sure, given the recent stock price run-up and a P/E of 14, ASH is not as cheap as it was in May, but the shares are still favored here, particularly given the very good prospects for substantial share appreciation (+50%).

However, do note the revised Sell/Stop Loss: $23 up from $8. The First Call FY2009/FY2010 EPS estimates for ASH are $3.04 to $3.16.

Stock Analysis: Ashland is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in ASH 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 75% of your ASH position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $23.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: ASH, Ashland Inc.

Print this

Reader Comments (Page 1 of 1)

8-28-2009 @ 3:22PM

Iridium said...

I don't get this. Please explain.

When a stock is up 40% before there is any real recovery and before there is any profit momentum, it is a buy and looks to go far higher.

Shouldn't a 40% rise already have priced in the recovery?

Shouldn't we wait for actual profits and growth before trading a stock higher based on pure speculation?

Isn't trading on pure speculation of events that never materialized what put us in this mess?

SO really the point of trading is to bullshit a stock higher to make greater profit on the shares you bought when the stock was trading lower. I get it now. The real economy and the laws of economics don't matter in the business of trading stocks.