Today I established 4% position in Huntsman Corp, ticker HUN, at $11.60.
Positives include:
(1) Ability to pass along raw material cost increases to customers in the form of price increases. Based on my macro outlook of accelerating price inflation over the next few quarters I expect revenue growth to accelerate from both rising prices and increasing demand.
(2) Latin America and Asia represent about one-third of revenue and are the fastest growing regions. With idle capacity in many of its product lines, there should be ample room to meet rising demand. Additionally, the company should benefit from weakening of the US dollar as foreign sales are converted to dollars for reporting purposes.
(3) Valuation is attractive with a 3.5% dividend yield and a 13x P/E on the consensus 2011 EPS estimate of $0.88. Six analysts cover the stock with five at a Hold rating, offering dry powder for upgrades.
As time allows I will continue to work on this idea, fleshing out the investment thesis and investment risks.
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