Mr. Harrison: At First Analysis, we cover about 20 specialty chemical names, and I'm responsible for what we think of as the more energy-related companies and a handful of more materials-focused names. I cover industrial gases, some of the inorganic materials companies, like OM Group and Ferro, some diversified specialty chemical names as well as a few oil and gas services companies. Right now I'm really focusing on stocks that have cyclical exposure and are going to benefit from what should be a continuing economic expansion in developed countries as well as emerging markets. At the same time, I'm a little bit cautious on companies that have historically had difficulty dealing with increasing raw material costs and volatility. So I'm particularly interested in the industrial gas companies, like Air Products and Praxair, right now, which have broad industrial exposure and minimal raw material risk.
We also have a number of investors that are concerned about what's going on in Europe right now, and that credit issues and austerity measures there could contribute to slower global growth than people might have been anticipating. And that could act as a drag on U.S. stocks over the next six to 12 months. In that case, I would be looking at some more defensive-type names. I think the industrial gases fall into that category, and you might even look at a company like Ecolab, which has historically performed very well when other companies in the chemical space have declined. From the beginning of September 2008 through the March lows, for example, Ecolab was down 35% while the broader market declined 47% and our First Analysis Specialty Chemicals Index was down 58%. Ecolab was also the only company in our space that showed EPS growth in 2009 over 2008.
Tickers included in this excerpt: APD, ARG, ASH, BP, ECL, FOE, NLC, NR, OMG, PX, ROC, TTI
For more information call (212) 952 7433. The Wall Street Transcript does not endorse any of the comments made by interviewees, and does not make stock recommendations.