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Chemical company Ashland Inc. (ASH), reconsidered here on August 27, 2010, at a price of $48 after an initial $21 or 80% gain, exhibited sideways stock action this summer and fall, but just look on that delay as an extended buying opportunity.
Look for Ashland to post a 5 % to 6% revenue increase in 2011, propelled by a stronger performance in all business units.
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 antifreeze brand, among other business operations. Further, to-date demand recovery during the expansion has been better-than-adequate, with modest pricing power.
Finally, Ashland's water treatment business (20% of revenue in 2009), which supplies chemicals for manufacturing, food processors, and water systems, may comprise a greater percentage of revenue in the immediate years ahead.
The Thomson Reuters First Call FY2011/2012 EPS estimates for ASH are $4.40 to $5.16.
Technically, Ashland traded in a roughly $45 to $50 range for the past six months, but a bottom appears to be in place near $45.
2011 Outlook: I view Ashland as a long-term play, but if you're looking to sell ASH within the year, it's probably best to take your profits after it rises to $57 to $59, if it fails to clear $60.
Stock Analysis: I consider Ashland Inc. to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in ASH now; I'd put a sell/stop loss at $37.
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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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