Anthony Speciale Stock Market Analyst

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This Best in Class Company is On Top in Everything It Does

No matter what the endeavor might be, we all want to be “number one!” And today, I’m going to present to you a company that’s the best in several different businesses but is not getting as much love from Wall Street as I think they should.

All of us interact with this company’s products every single day of our lives, and we don’t even realize it. Olin Corporation (OLN) is a chemical company that has several great businesses.

First, it is the number one bleach producer in the United States. Bleach was in high demand even before the pandemic, but bleach is going to remain in very high demand as cleaning protocols for factories, offices and homes have changed forever post-pandemic. Even without the pandemic, bleach is just one of those commodities that is always in steady demand.

They’re also number one in the global epoxy resin market. Now, this surprised me a bit, but there’s a shocking amount of stuff held together by epoxy. For example, paving overlays for airports, roads and bridges, industrial and commercial flooring, oil platforms, pipelines, refining equipment, storage tanks and much more all involve heavy amounts of epoxy. While we don’t think about this much, it’s actually a high growth business, and there’s huge demand for it.

They’re also number one in chlor alkali products, which include lye, caustic soda and chlorine. There are a ton of uses for chlorine as well, such as water treatment and plastic production, while caustic sodas are used in things like soap, glass and PVC pipe. There are literally hundreds of uses for these things that we don’t even think about but that we interact with on a regular basis.

They also have a fourth division focused on firearm ammunition that came from its acquisition of Winchester. They sell ammunition for recreational shooting sports as well as to the military and law enforcement. You may not interact with this segment of the business as much, but they are still the leader in this market as well.

So, those are the company’s four divisions, and they’re number one in all of them. And owning a company that’s number one means we should be getting that high multiple pricing that the great growth stocks are getting.

The stock has some momentum, but let’s consider what’s going on here. The company posted massive earnings increases this year, they’ve beaten estimates the last four quarters in a row and Wall Street’s falling all over itself to raise estimates for next quarter and next year.

Usually when this happens, the company is considered a great growth stock and is trading at 25, 30 or even 40 times earnings. But OLN is trading at just seven times earnings. But the estimates are going higher, the company is going to keep growing, these are all markets that will see increased demand going forward and there has even been some institutional buying.

So, we’re getting the smooth, up-and-to-the-right price momentum that we want to see, but we also have a cheap earnings play at the same time. Quite often, when you combine a momentum play with either a cheap assets or cheap earnings play, wonderful things happen, and that’s exactly what I think is going to happen with Olin Corporation.