Mat-Chem Notes for the Week Ended January 2, 2022



KEY HIGHLIGHTS
  • WTR-CMI last year. With 2021 in the rear-view mirror, this week we will examine the annual performance of the broader market and stocks in our WTR-CMI index of chemicals and materials technology companies. Despite COVID-19-related production disruptions, logistical bottlenecks and rising costs (of raw materials, energy and labor), the large-cap S&P 500 index appreciated 26.9%, outpacing the broader Russell 2000 index, which gained 13.7% as large caps outperformed small-cap stocks. Our index appreciated 23.7% if we include the companies that were dropped from it over the year after they were acquired (usually at a significant premium). Eleven of our 30 stocks outperformed the S&P 500, and 16 outperformed the Russell 2000, underscoring solid breadth across our industry. Once again, 2021 demonstrated the investment appeal of the chemicals and materials technology sector and its ability to deliver superior results for investors.
  • Winners and losers. Given the rapid growth of electric vehicles (EVs) across geographies, it is not surprising that lithium stocks (LAC, PLL, ALB and LTHM) were among the leaders in terms of stock price appreciation in 2021. VVV’s decision to separate into two companies, and FUL’s results, which kept surprising investors on the upside, drove up their stock prices. While ECVT was the biggest loser of the year on paper, the stock price fails to account for the $3.20/sh special dividend paid to shareholders after the sale of its Performance Chemicals business. CMP’s pivot from a high-dividend paying, slow-growth, basic materials entity to a growth company was not well understood by investors, resulting in its place near the bottom of the 2021 performers.
  • Global paint market growth looks promising. A recent report forecasts strong growth for architectural paints, the biggest sub-segment of the Paints & Coatings industry. It foresees this market growing at a 5.1% CAGR from $71.3 billion in 2021 to $91.6 billion in 2026. While this is good medium-term news for leading paint companies such as SHW and PPG, we note that 2022 may be a difficult year as the industry works to pass on higher input costs, while dealing with near-term margin pressures and still-present labor constraints.
WTR-CMI WEEKLY PERFORMANCE

WTR-CMI last year. With 2021 in the rear-view mirror, this week we will examine the annual performance of the broader market and stocks in our WTR-CMI index of chemicals and materials technology companies. Despite COVID-19-related production disruptions, logistical bottlenecks and rising costs (of raw materials, energy and labor), the large-cap S&P 500 index appreciated 26.9%, outpacing the broader Russell 2000 index, which gained 13.7% as large caps outperformed small-cap stocks. Our index appreciated 23.7% if we include the companies that were dropped from it over the year after they were acquired (usually at a significant premium). Eleven of our 30 stocks outperformed the S&P 500, and 16 outperformed the Russell 2000, underscoring solid breadth across our industry. Once again, 2021 demonstrated the investment appeal of the chemicals and materials technology sector and its ability to deliver superior results for investors.

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