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Wednesday, 01/16/2002

DOW - DOW Chemical

Company Description

Dow is a leading science and technology company that provides innovative chemical, plastic and agricultural products and services to many essential consumer markets. With annual sales of $30 billion, Dow serves customers in more than 170 countries and a wide range of markets that are vital to human progress, including food, transportation, health and medicine, personal and home care, and building and construction, among others. Committed to the principles of Sustainable Development, Dow and its approximately 50,000 employees seek to balance economic, environmental and social responsibilities.

Dow people around the world develop solutions for society based on Dow's inherent strength in science and technology. For over a decade, we have embraced and advocated Responsible CareŽ - a voluntary industry-wide commitment to safely handle our chemicals from inception in the laboratory to ultimate disposal. This worldwide commitment helps consumers lead better lives, customers succeed, stockholders prosper, employees achieve and communities thrive.

(Source: Dow Chemical)

Reasons To Invest

***Aggressive Investors Only***

Care for controversy? Here's a bit.

Among many others, Dow Chemical has been knocked down big in recent weeks over fears of asbestos litigation. Dow recently settled a case in Texas against Union Carbide, a company that Dow acquired last year. The terms of the settlement were not disclosed, but Dow said that the agreement was within the parameters of past settlements against Union Carbide.

Further fear entered the equation following the settlement as investors discounted future settlements against Dow Chemical. Several analysts exacerbated the fears by downgrading shares of the company. For instance, UBS Warbug reduced its rating on the stock from a strong buy to a hold, citing future asbestos problems.

Dow has kept quiet about its asbestos exposure. For its failure to address the asbestos risks, fear has run rampant in its shares. And fear is the most powerful emotion in the market. If there were a material change to Dow's financial position, the company would have to disclose as much through a regulatory filing.

There are two points of view concerning Dow's hush-hush stance. First, the company doesn't perceive the asbestos litigation as a risk. Second, the company does not yet know how much exposure it has to asbestos litigation. Judging by the company's informal comments surrounding the recent Texas ruling, the most likely scenario is the former. But that's only speculation. If the company does file with the SEC, disclosing its exposure to asbestos litigation, it could knock down the stock more depending on the severity of the news.

Why, then, are we interested in Dow Chemical? Good question.

There appears to be more psychology at play in shares of Dow currently than actual economics. The economy is turning around. Never mind by how much. The rebound in the economy, however small or larger, will positively benefit Dow's operations. Furthermore, the low price of energy should continue to help Dow's earnings along as the company is highly levered to the cost of energy. Should the fears (Read: A return to rationality) subside, Dow should bounce back in a big way, which makes its shares attractive at current valuations. Finally, it seems far-fetched to believe that the government would allow Dow Chemical, and so many other large U.S. corporations, to fall into insolvency because of asbestos litigation. Government intervention is not out of the question.

However, this is an aggressive play. A proper risk management strategy, such as a protective put, should be considered for mitigating downside risks.

DRIP Information:
Shares to Qualify = 1           Accept Foreign Accounts: Yes
Auto-reinvestment = No          Temper Enrollment Serv:  Yes

Min/Max Investment = $25 to $25,000/year
Reinvestment Fees: 0   Cash: 0   Auto ReInvest: 0

Transfer Agent:

Boston Eq.


Industry Group:        Chemicals  52-week high=$39.67
Annual Dividend Per Share=  1.16  52-week low =$25.06
Last earnings 10/20   est = 0.16  actual = 0.16
Next earnings 01-31   est = 0.05  versus = 0.36
                                     P/E =   26
Analyst Ratings:
Strong Buy    = 4
Moderate Buy  = 4
Hold          = 4
Moderate Sell = 0
Strong Sell   = 0


Copyright 2003

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