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Friday, 02/13/2004

Bow DOWn
By Nich Sheldon
DOW - The Dow Chemical Company

Company Description

Dow is a leader in science and technology, providing innovative chemical, plastic and agricultural products and services to many essential consumer markets. With annual sales of $33 billion, Dow serves customers in more than 180 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 46,000 employees seek to balance economic, environmental and social responsibilities. References to "Dow" or the "Company" mean The Dow Chemical Company and its consolidated subsidiaries unless otherwise expressly noted.

[Source: Company Press Release]

Reasons to Invest:

The market has turned around this week, sparking a bullish rebound in a time of uncertainty. In all actuality the fluctuation in the market is just further proof of how unpredictable the market truly is. Friday's sell-off wasn't unjustifiable; after all, we saw new highs on the INDU and the SPX just two trading sessions ago. With this in mind, I am speculating a continuation of the sell-off into next week. The DOW Chemical Company (NYSE:DOW is this week's DRIP of the week, and I am going to suggest waiting for a lower entry point before adding on any new positions.

Since March of last year DOW has been on a continued upward regression channel, setting new 52-week highs along the way. For the past six months, DOW has been setting a nice up/down trend. What I noticed was that six months ago, the stock sunk for a month. Then it shot higher over the next month, sank the next month, shot higher, sank, you get the picture. DOW has been trending higher in February tipping 44.00 today, before slumping lower. Today the stock came close to hitting the top of its channel, but the past two overextended sessions were too much for DOW, as it retraced all of Thursday's gains (and then some). I am hoping to see a return to the middle of its regression channel (approximately 41.40, as of Friday 02/13/04), which should spark new bulls and provide a better entry point for us long term investors. The stochastics indicator is definitely signaling an overbought stock, which hypothetically means that we could see a few sessions of profit taking here in the near future. I would set an entry point (or trigger the DRIP) on a retest of the 50-DMA, which is only a few points away from the middle regression line. A touch of this moving average and I am going to put in the order for the DRIP.

From a less technical viewpoint, DOW and General Motors (NYSE:GM) just announced that they were going to join forces and power a plant using their fuel-cell technology. This would be the largest commercial venture of its kind. Apparently GM is going to provide the fuel cells, while DOW is going to provide the hydrogen for the cells.

Reuters Investor has a low risk rating on new entries in DOW. Their dividend percentage rate is expected to be at 4.93 percent over the next three years, and 2.93 percent over the next five years. Furthermore, DOW reported its highest revenues in the past four years, in 2003. The same thing goes for their earnings per share history. They reported earnings of 1.87, which is 2.32 high than the previous year's earnings per share (-0.45).

Sales rose last year by a margin of 18 percent to $32.6 billion. Net income before an accounting change totaled $1.74 billion versus a loss of $405 million (no comment needed!). Their revenues were reported to reflect improved volume and price increases. Net income is said to reflect the absence of an $828 million asbestos related charge. Keeping this in mind, one could come to the conclusion that the DOW has down a complete 180 from 2002. I am hoping to see more of the same in 2004.

A hefty dividend is a great incentive in my eyes. DOW yields a 3.06 percent dividend (one of the highest we have seen in a long while), which tallies out to $1.34 per share owned.

This ends another exciting episode of the Drip of the Week. Stay tuned next week, as we will spotlight another stock worthy of the limelight.

Until Next Week,
Nich Sheldon

Broker Recommendations

Strong Buy         2
Buy                5
Hold              10
Sell               0
Strong Sell        0

Brokers Covering  17

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

Min/Max Investment = $25,000/Quarter

Reinvestment Fees - 
Dividend investment fees: 0
Cash investment fees: 0
Auto reinvestment fees: N/A

Transfer Agent:
Boston Eq

Corporate Headquarters:
2030 Dow Center
Midland, MI 48674
Phone: (989) 636-1000
Fax: (989) 636-4033


Copyright 2003

Do not duplicate or redistribute in any form.
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