Zacks Industry Rank Analysis Highlights: BASF, Dow, China Carbon and Flexible Solutions

Thu May 19, 2011 9:30am EDT

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Zacks Industry Rank Analysis Highlights: BASF, Dow, China Carbon and Flexible Solutions

PR Newswire

CHICAGO, May 19, 2011 /PRNewswire/ -- Stocks featured in this week's Zacks Industry Rank analysis include BASF (OTC: BASFY), Dow (NYSE: DOW), China Carbon (OTC: CHGI) and Flexible Solutions (NYSE: FSI).

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Zacks Industry Rank Analysis is written by Dirk Van Dijk, CFA, Chief Equity Strategist, Zacks.com.

The Right Chemistry

The Diversified Chemical industry is a large one. It has 32 firms in it, and many of these firms are huge, household names, even if their direct exposure to the customer is sometimes limited. A large number of firms makes it much less likely that the industry will end up o the top (or bottom, for that matter) of the charts. The industry is currently in 18th place, a deterioration of six spots from last week, with an average score of 2.38 up from 2.28.

The Specialty Chemical industry is also larger than average with 26 firms. It is currently in 22nd place, an improvement of 31 spots as the average Zacks rank has tumbled to 2.42 from 2.73.

Those firms tend to be more stable and less cyclical than the Diversified Chemical firms. The output of the Diversified Chemical firms tends to be measured in tons, the output of the specialty firms in pounds. The Diversified Chemical firms are often major suppliers to the Specialty Chemical firms. The specialty chemical firms tend to be smaller than the Diversified Chemical firms.

Strong Buys and Buys

Eleven of these chemical companies (19.0%) have Zacks #1 Ranks, and 22 (37.9%) have Zacks #2 Ranks. There is a wide spectrum of market capitalizations to choose from on the lists ranging from mega-caps like BASF (OTC: BASFY) and Dow (NYSE: DOW), down to the tiny China Carbon (OTC: CHGI) and Flexible Solutions (NYSE: FSI).

This is a worldwide industry, and several of the firms are ADRs. Valuations are for the most part reasonable, particularly if you are willing to look out to 2012 earnings. The estimates on these firms are rising, and an estimate in motion tends to stay in motion, so the true P/E on these firms might be lower than it looks based on current estimates.

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