Mat-Chem Notes for Week of December 1, 2021



KEY HIGHLIGHTS
  • WTR-CMI last week. If we thought the week before last was a tough one for the market, last week’s performance was even worse, with only three stocks in our index delivering positive returns. Our WRT-CMI index declined (3.6%), exceeding the (2.3%) loss of the S&P 500, but outperforming the broader Russell 2000 index, which fell (5.0%). We take small consolation in the fact that our index’s performance still exceeds that of the market on both YTD and YoY bases.
  • Winners and losers. HXOH was the best performer last week, appreciating 11.1% after announcing the sale of its epoxy business to Westlake Chemicals (NYSE: WLK) for $1.2B. Likewise, LAC’s 7.5% return was likely driven by its announcement of increased stake in Arena Minerals (TSX-V: AN), an early-stage lithium-reserve developer with mineral properties in Argentina. Fellow junior lithium miner PLL was the only other stock in our index with a positive return last week, appreciating (0.8%). At the other end, HXL was the biggest loser, declining (15.1%), as investors remain pessimistic about the pace of recovery in the aerospace & defense industries. CCMP lost (8.5%) of its value, possibly driven by the announced CFO transition. ECVT declined (8.2%), edging closer to the announced $9.50 price of a secondary offering.
  • Auto production ending on a whimper. The numbers on auto production in the UK look ugly for October, with a YOY decline of (41%) to the lowest production level since 1956! The drop brings YTD production down (2.9%) vs. the same period in 2020. While the overall European Union (EU) auto market has grown in low single-digit YTD, with two more likely down months to go, auto production for 2021 may end flat or decline slightly. We see stabilization at lower levels as the most likely scenario for 1H2022, implying continuing negative volume comps for suppliers into the auto industry, such as AXTA, PPG, FUL, AVNT, and others.
  • EU commercial vehicle data looks no better. European commercial vehicle registrations declined (16.4%) YoY in October. However, YTD registrations are still up 14.7%, thanks to triple-digit growth in March-May. This adds to our view that 1H22 will continue to see negative YoY comps in the sector, even if demand improves modestly sequentially vs. 2H21.
WTR-CMI WEEKLY PERFORMANCE

WTR-CMI last week. If we thought the week before last was a tough one for the market, last week’s performance was even worse, with only three stocks in our index delivering positive returns. Our WRT-CMI index declined (3.6%), exceeding the (2.3%) loss of the S&P 500, but outperforming the broader Russell 2000 index, which fell (5.0%). We take small consolation in the fact that our index’s performance still exceeds that of the market on both YTD and YoY bases.

DISCLOSURES

Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.

WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information p...