As the old saying goes, a rising tide lifts all boats.
And with the financials pouring it on lately, nearly every sector across the market has suddenly become buoyant.
But while the ups and downs of the financials have been a trader’s dream, making long-term investments in a zombie bank or two leaves plenty of room to the downside — especially if the government decides to dilute them into oblivion.
That makes the likes of Citigroup and friends entirely too risky to bet on here, even though they supposedly "blew out" their earnings of late. Smoke and mirrors do have their advantages.
However, when their latest magic act fades into the memory hole, no one can really say for sure what will happen to them. After all, reality is much harder to finesse.
So, the truth is investors in these fine institutions are most likely playing a game of three card monte at the moment in which the losers out number the winners by a wide margin. Even still, the game goes on with Goldman Sachs dealing the cards.
However, that doesn’t mean all stocks are part of the same game by any stretch of the imagination. That’s because, far away from the financial carnival, there are real companies with real balance sheets producing real products.
That’s where investors can make some real hay these days as the markets find their footing and good companies suddenly show up on the bargain rack.
That being said, one area to concentrate on these days is chemical sector stocks, since an upturn in basic materials will undoubtedly precede an end to the downturn.
Chemical Sector Stocks Get a Stimulus Boost
But that is not the only reason to get in early on chemical stocks.
That’s becausem as I wrote last month, the chemical industry is one of the biggest beneficiaries of the 1,071 page stimulus bill that apparently nobody read but me.
You see, woven through literally hundreds of pages of earmarks and actual projects — shovel ready or not — I found an entire industry buried in the background that’s guaranteed to benefit from all of the pork packed into the bill.
In fact, out of that whopping 787 billion dollars, roughly 10% will fall right into the laps of the chemical sector, since it is an industry that literally ties into everything we use on a daily basis.
And whether it’s roads, renewable energy, or a smart grid, chemical companies stand to benefit.
That’s $78.7 billion guaranteed — by law — to an industry that has its fingers in everything we touch.
And the mainstream media is already starting to catch on.
· Forbes recently observed, "Chemical makers stand to get a much-needed boost as an indirect recipient of the billions in government money promised in the stimulus package signed by President Obama."
· The Associated Press confirms my estimate. "Of the $787 billion in the stimulus bill, at least one-tenth is allocated to projects that could benefit chemical companies."
· The American Chemistry Council went on record excitedly stating, "Some qualifying technologies are ‘shovel-ready’ and ideally suit the president’s objective to support investments that create jobs, improve energy security and reduce greenhouse gas emissions."
Needless to say, this has chemical stocks poised to rebound no matter what happens with the phony financials.
As a result, chemical stocks have been on a tear of their own as the massive drop in GDP from the first quarter has decelerated from its end-of-year free fall.
DuPont Eyes Green Shoots
That’s a view shared by DuPont Co., the third-largest U.S. chemical maker.
In fact, on Tuesday, DuPont even talked about some green shoots of their own, predicting that demand will improve from first-quarter lows because most customers have used up inventories and are increasing purchases.
On top of that, the chemical giant’s March sales were actually higher than in the preceding two months, and industrial demand will rise through the year, resulting in a "moderate" decline in full-year sales volumes, according to Chief Financial Officer Jeff Keefer.
Of course, now that the industry has bottomed out, and some of these new projects are already underway, right now is the prime opportunity for you to land some of the easiest moneymaking plays you’ll see this year.
But you’d better hurry — many of these companies are already charging ahead. In fact, to date, nearly all of them have rallied off their lows, including:
· DuPont with a 70% gain
· PPG Industries with a 58% gain
· And Dow Chemical with a 105% gain!
So you see, a rising tide really does lift all boats. Just be careful which one you jump into.
Some boats are whole lot more seaworthy than others.
Your bargain-hunting analyst,
Steve Christ, Editor
P.S. The Wealth Advisory team has identified one of the chemical industry’s biggest winners so far. Since the March lows, this company has jumped by over 50% and still has room to run even higher. To learn more about this opportunity to cash in on the rising tide, click here.