Saturday, January 12, 2013

"The Canary in the Coal Mine for detecting a Bull Market can usually be found in the Chemical stock Sector. Let's take a look."

Dow Jones Industrial Average 13,488.43 (UP) Week ending 01-11-2013

Going back to some "Old School" thinking , one early indicator in the beginnings of a Bull Market was to look at a rise in Chemicals Sector stocks as an early indicator to detect an uptick in economic activity.So this week I decided to take a look at 4 chemical company stocks.

LyondellBasell Industries N.V. Cl A (Symbol LYB) ,

Cytec Industries Inc. (Symbol CYT) 

Eastman Chemical Co. (Symbol EMN) 

PPG Industries Inc. (Symbol PPG) 

So what can we gleen about the state of the bull market from these four? Well for one thing, the One Year and the 3 Year performances of these stocks has been stellar already.

Here they are:
(Stats from

LYB -  1Yr - Up 64.38%      2.1Yr. -Up 173.3%
CYT -  1Yr. - Up 48.17%      3 Yr. - Up 86.59%
EMN - 1Yr. - Up 56.56%     3 Yr. - Up 152.82%
PPG -  1 Yr. - Up 63%          3 Yr. - Up 142.25%

Two of these stocks qualify for my criteria to purchase of being below a PEG ratio of 1.50 and have a Return On Equity above 15%. Those are LyondellBasell & Eastman. 

PPG has a PEG ratio that is too high right now, so you need to wait for it to come in a little bit, but it is an excellent company.

Cytec has improved there product mix with higher margin products and will have a big run up in earnings. Their Return on Equity is a little light right now, but I would put this one on your watchlist. 

So I would say from our Canary analysis that the bull market is well on its way already. You might want to add LYB or EMN into your diversified portfolio.

 My preference would be Eastman Chemical , Symbol EMN)  because of it's quarterly year over year revenue increases and consistent dividend. 

So keep an eye on all 4 of these stocks to keep a barometer on this slow moving bull market.


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