Mat-Chem Notes for Week of December 5, 2021



KEY HIGHLIGHTS
  • WTR-CMI last week. The stock market improved slightly last week vs. the magnitude of declines seen previously, although both broader market indexes – S&P 500 and Russell 2000 – were still down for the week (1.2%) and (3.9%) respectively. Our WTR-CMI index of 30 chemicals and materials technology companies slightly underperformed the large-cap S&P 500, delivering a (1.7%) return for the week. YTD our index continues to outperform S&P 500 by over 300 bps and has exceeded Russell 2000 returns by more than two-fold.
  • Winners and losers. The two coatings majors – SHW and PPG led our index by appreciating 5.9% and 3.1% respectively, with CCMP and FUL almost keeping pace, delivering 2.8% returns for the week. Signs of an easing semiconductor shortage and investor enthusiasm over the still-strong building and construction markets likely contributed to the stronger performance of these stocks. At the other end, LAC saw its value decline (12.0%), likely due to the pending issuance of $225M in convertible debt, which may have also dragged down other lithium stocks, as PLL, ALB and LTHM all saw significant declines for the week. Morgan Stanley’s initiation of HXL at Underweight with a $55 price target (PT) may have accounted for the stock’s (7.7%) decline.
  • EMN gains another recycle materials partner. The company announced it was entering into collaboration with Amorepacific to introduce sustainable packaging solutions into the personal care and cosmetics market using Eastman’s molecular recycling technologies. Chemical companies, such as EMN, are quietly doing their part to provide responsible product stewardship and move toward a circular economy for their products – an effort that should not be overlooked by ESG-focused investors, as it may deliver more tangible near-term value and environmental benefit. AVNT is another company that is working to mainstream recycled plastics.

Cloudy ag-market crystal ball. As farmers are weighing 2022 planting acreage decisions, cost inflation and product availability add another layer of uncertainty into the equation that typically centers around crop prices. China’s latest efforts to confront its poor environmental and safety record and its impact on production and export of key intermediates and active ingredients add further uncertainty to acreage forecasts.

WTR-CMI WEEKLY PERFORMANCE

WTR-CMI last week. The stock market improved slightly last week vs. the magnitude of declines seen previously, although both broader market indexes – S&P 500 and Russell 2000 – were still down for the week (1.2%) and (3.9%) respectively. Our WTR-CMI index of 30 chemicals and materials technology companies slightly underperformed the large-cap S&P 500, delivering a (1.7%) return for the week. YTD our index continues to outperform S&P 500 by over 300 bps and has exceeded Russell 2000 returns by more than two-fold.

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