Mr. Schwartz: Out of the about 20 specialty chemicals companies we cover at First Analysis, I cover stocks in paints/coatings/adhesives, like Valspar and H.B. Fuller; inorganics, like Calgon Carbon and Minerals Technologies (MTX); diversifieds, like Albemarle and Koppers; and polymers, like Spartech and PolyOne. I am focusing on a few opportunities that touch companies across the multiple subsectors within the space. Among those are companies that can leverage growth in the developing countries. As we look to the recovery, I think there are also some situations where some companies will be able to leverage a pending global supply-demand imbalance. I also see what appear to be several companies where the stock price does not appear to reflect the level of recovery these companies have experienced. From the reason-for-caution side, we continue to see volatility in raw material costs, particularly through the supply chain from natural gas, and that is keeping me focused on a significant number of names in the space from a downside risk standpoint. I've also been watching closely any company that has implemented a significant restructuring plan through the downturn, where my analysis gives me a cautious attitude toward the leverage companies might have as volumes recover. Yet the market is baking in significant leverage.
TWST: Are there any broad themes you're watching in terms of the firms you find favorable these days?
Mr. Schwartz: Yes, I think any company that is exposed to growth in the developing countries and has invested in the infrastructure to access that growth has opportunities before it. It is not only because the developing countries, particularly the Asian countries, held up relatively better through this global recession, but also because of the longer-term secular trend that is going on with these populations raising their standard of living. The companies I think of in this regard include Albemarle, with their polymer additives franchise; PolyOne, with their expansion in India; and Valspar, with their 2006 addition of Huarun Paints to an existing coatings business they had in Asia.
Tickers included in this excerpt: AA, AKZA.AS, ALB, CCC, CEM, ENTG, FUL, KOP, POL, PPG, SEH, SHW, VAL
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