Back we go to the well to take another sip of Louis Navellier’s delightful bullishness — he’s got an ad out for his Blue Chip Growth (currently $100/year), and it’s all about a “magic metal” that he thinks will make you rich.
This is the part that caught my eye, partway through the ad:
“This One Little Stock Could Double Every 12 Months for the Next Eight Years”
So that sounds pretty impressive, right? Is there really a stock that can do that? Can Louis Navellier pick it in advance? Let’s see what we can learn from the Mighty Mighty Thinkolator… these are the clues that launch the ad:
“Imagine…if you possessed a magic metal for making money… a magic metal that’s used in millions of everyday products… that virtually every manufacturer on the planet had to buy from you.
“What if demand for this metal was expected to triple?
“Chances are, you’d triple your wealth.
“That’s the $2 billion bet Vanguard, Blackrock, FMR, and State Street are keeping to themselves.
“No I’m not talking gold…or silver… or lithium …but something that could be much, much bigger.
“Here’s the full story and how you can use this inside knowledge to build substantial wealth for yourself and your family—now and for years to come.”
I’m imagining! I’m imagining! In my imagination, I’m also driving a shiny red Ferrari… but since it’s my imagination, it’s got a La-Z-Boy driver’s seat with one of those electric lifts so I don’t have to crawl on the ground to get in. After all, I’m wearing fancy pants.
Where were we? Oh, right, substantial wealth is just waiting to be built… so what’s the source of this wealth for our future selves?
Navellier hints at this white powder that he calls a “magic metal”, here’s some more description of that:
“… this magic metal possesses unique properties that not only make paints whiter and keep plastics from cracking but also protect both your skin and your car’s paint from sun damage. It’s even used in the manufacture of lightweight aerospace and car parts.”
Apparently demand is surging from the automotive sector, and “analysts project demand for this magic metal to triple in the next eight years” as the number of autos on the road rises.
What else do we learn about the stock behind this “magic metal?” Here are the rest of our clues…
“Delivered four positive earnings surprises in a row….
“Seven analysts predict 11% sales growth for 2018….”
And we’re told that the company has had a 73% “run-up” over the past year.
They also must still be using the same ad copywriters, because someone at Investorplace is convinced that listing the institutional holders of a stock is a compelling visual… so we see that Vanguard held 9.78% of the outstanding shares as of the end of September, for example, and Fidelity 8%, among other biggies that we all recognize (as with most listings of institutional holders, it’s dominated by index fund providers who, by definition, did not select the company on its merits).
So what is this stock that’s going to surge as it provides “magic metal” to the auto sector and other customers? Thinkolator sez… Chemours (CC)
Or, if you prefer, The Chemours Company. Which is, indeed, the world’s largest producer of Titanium Dioxide — which is that “magic metal”, and the core product for the largest segment at Chemours (though it’s still responsible for less than half of revenue and earnings).
Chemours has three main divisions, and the largest drivers seem to be titanium dioxide (their product is “Ti-Pure,” on which they raised prices 20% last year), and Opteon refrigerants (which are being adopted as a next-generation replacement for hydrofluorocarbons, like Dupont/Chemours’ Freon_, though they also sell other fluoropolymers and have a relatively small chemical solutions business (performance chemicals, mining solutions, etc.)
Chemours was spun out of Dupont almost three years ago, and looked troubled for a while — Citron Research even posted a scathing report about Chemours being “designed for bankruptcy”, partly because Andrew Left claimed it was designed to let Dupont (now DowDuPont, DWDP) shed its environmental liabilities (or if you want to see a different perspective, Fortune had a profile on how Chemours came back from the brink in 2016 here). The stock started a solid recovery not long after that, just about doubling in 2017 on strong earnings and guidance… with anticipated tax reform benefits provided a nice tailwind.
Chemours just this week issued new guidance for 2018, an updated outlook that puts the forecasted EBITDA and EPS at the top end of the range they had communicated earlier — on an earnings basis, that means the adjusted earnings per share should be at the top end of the range of $4.95-$5.60. So if we guesstimate $5.50 in earnings for 2018 (that’s the average number being used by analysts now), CC is trading at a forward PE of less than 9. Which is awfully compelling for a stock that is expected to grow earnings by 10% a year for the next couple years. You can see the last earnings presentation here.
There are some health and environment lawsuits that generate headlines for Chemours and DuPont, similar to the concerns outlined by Citron a couple years ago and mostly related to cleanup around past manufacturing sites, and I have no idea which ones might have merit or be financially significant. Moody’s announced that recent perfluorochemical litigation in North Carolina and Ohio was significant enough to be “negative” for the credit profile of Chemours (and Dupont) back in February, so it’s probably not a trivial financial risk. I don’t know whether or not it’s a moral risk, that’s your call to make and I don’t know the full story of those chemical plants or the cleanup issues.
And, as with all Navellier-recommended stocks, they have indeed done a lot of “beat and raise” quarters, and the analysts have increased their estimates — those are the two data points that really stand out in Navellier’s quantitative system. Growing and surprising stocks do tend to keep growing and surprising, which is why such quantitative systems work for a while, but a “tendency” is not the same as a “guarantee,” so betting on a single stock to continue that trend is, of course, a risk. Navellier’s public “grade” for Chemours is currently a B, the same as it’s been since November… and you can see an older bullish commentary from Navellier about Chemours here (from July — if you had bought then, you would have almost exactly mimicked the S&P’s return of about 9%).
What will the future bring? Is this specialty chemicals firm going to double every year for the next eight years, as Navellier predicts? Think the environmental liabilities will catch up with them? It’s your money, so it’s your call — let us know what you think with a comment below.
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