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Trade: Play the hot sector and emerging market with BASF AG

By SumOfSome | May 13, 2007

After each set of bi-weekly screens, I will select one stock which sticks out based on various indicators. This week’s selection is BASF AG (Ticker:BF) at $118.17/share.

Screen Recommendation: While this stock was only recommended by one screen, that screen, The Street’s All Around list, has shown very strong performance, averaging 2.04% above the S&P in 2-week time frames, and 10.31% above the S&P in 10-week time frames.

Analyst Ratings: MSN’s analyst report, Yahoo’s Star Analysts, and CNN’s analyst ratings show BF as a Strong Buy, 4 of 5 stars, and Overweight respectively. Briefing’s Analyst Upgrades/Downgrades do not show any recent upgrades or downgrades.

Technical Indicators: Various moving averages as found on BarChart, show a 75% medium-term and 67% long-term upward trend. In the short term, BF has lost some of its previous momentum, and has recently dipped 3% from its high one month ago. Considering the other strong indicators, I look at this short term loss of momentum as a better buy-in point. Additionally, even with the strong growth over the past year, BF is showing a low RSI, even nearing the oversold line.

Sector and Industry Performance: Looking at Clearstation’s Industry and Sector views shows that Basic Materials is the leading sector in the market right now over a 13 week period. However, within materials, the Chemical Manufacturing industry falls in the middle of the pack, with BF trailing near the end of the industry.  Still, being in the low end of a winning sector may be better than being in the high end of a losing sector.

  News / Company Opportunity: BF recently acquired Engelhard and Johnson Polymer, strengthening its position as a global leader. BF has now had time (6mo-1yr) to absorb and begin realizing the benefits of these acquisitions. They have shown strong sales increases in Brazil, Asia, and Africa. I think it goes without saying (or at least without pointing to articles for justification) that these emerging markets have been very strong in the last few years, and will provide a strong future area of growth.

BF has had strong growth, and should continue in the same. This should be an especially good play if you are looking to enter the Materials sector, or are seeking a company which is growing in emerging markets.

Topics: BF, Ticker, Trade, Trade Opinion | No Comments »