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TWST: Allan, do investors still have good reasons to be attracted to specialty chemicals today?

Mr.Cohen: We think so. It is a fairly heterogeneous group, which makes it amenable for stock picking, as opposed to group picking. Stepping back, I think many, but not all, of the attributes that have interested people in the group are still there. These companies do provide their customers with value-added problem solving. They were generally, and I would argue still, higher quality, less cyclical than most, although the volatility in the stock prices has probably increased. Finally, they are characterized by strong cash flow and often by creative management teams finding innovative ways to win. However, their customer base is primarily industrial, and the industrial sector has become a smaller part of GDP over the last 15 to 20 years in most developed countries. Additionally, they've faced challenges from their customer base, which has instituted supply chain management, global sourcing, and the like. However, there are still several companies that provide good investment opportunities with fairly high returns and quite moderate risk. Specialty chemicals and materials has been a good area to selectively invest in, but not for buying the whole group.

TWST: Allan, what are your two or three top picks at this point?

Mr. Cohen: Lastly, let me mention Cambrex (NYSE:CBM). Again they've done a great job in the life sciences area. They have moved increasingly into the biotech arena and have grown both internally and through the acquisitions. Part of their internal growth has not been visible in terms of volume growth but comes from basically finding higher value-added products to move into while taking lower value-added products out. I'd say the risks here are related to their repositioning or increasing their position in the investment community as a life science biotech play. So they have had some recent stock appreciation that, at least statistically, could appear to be driven off the biotech valuation expansion of the last year. Again, a certain part of their future growth is expected to be through acquisitions, and those are never guaranteed to happen, or happen at the right price, nor is it guaranteed that they'll be integrated properly.