We recently published a list of the Analyst Says These 10 Stocks Can Benefit if Donald Trump Wins US Election 2024. Since Dow Inc (NYSE:DOW) ranks 9th on the list, it deserves a deeper look.
Wolfe Research said in a note earlier this month that the odds have shifted in favor of Donald Trump following the first presidential debate. However, the firm believes we can see several “unexpected twists and turns” ahead. Wolfe Research also shared a list of stocks that could be potential winners should Donald Trump become the President of the US.
What could happen if Donald Trump becomes President of the US has been a topic of debate and discussion on Wall Street over the past several months. In late January, when the Russell 2000 index jumped, Zhiwei Ren, portfolio manager at Penn Mutual Asset Management, reportedly said that investors might be flocking to the “Trump Trade.” The Russell 2000 is a small-cap U.S. stock market index that makes up the smallest 2,000 stocks in the Russell 3000 Index. Ren said, according to Wall Street Journal, that since Trump is a supporter of low interest rates and less regulation, small-cap stocks, which thrive under Dovish economic policies, were reacting positively to the increasing chances of Donald Trump becoming the leading Republican candidate for the upcoming elections.
In this article, we first scanned Wolfe Research’s basket of stocks the firm believes could be potential winners in case of a Trump presidency. From these stocks we picked 10 companies with the highest number of hedge fund investors.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close up view of a specialized chemical compound in the lab.
Dow Inc (NYSE:DOW)
Number of Hedge Fund Investors: 35
Wolfe Research believes Dow Inc (NYSE:DOW) is one of the stocks that can benefit if Donald Trump comes to power.
Dow Inc (NYSE:DOW) is one of the biggest chemical companies in the world. The company operates in three segments: Packing & Specialty Plastics, Intermediates & Infrastructure and Materials & Coatings. The stock is down about 7% so far this year as pricing headwinds, unfavorable environment amid elevated interest rates and lower volumes continue to take a toll on business. But analysts believe the stock is poised for growth in the long term, especially after the interest rate cycle begins. Dow Inc (NYSE:DOW) is expected to deliver about $2 billion in EBITDA growth by 2026. Dow’s business is exposed to market cycles and interest rates. Dow Inc (NYSE:DOW) thrived when interest rates fell to near-zero levels in the midst of the COVID-19 pandemic. Amid unfavorable environment Dow’s management has been cutting costs and improving efficiency. Dow Inc (NYSE:DOW) recently decided to sell its flexible packaging laminating business to Arkema for $150 million.
Dow Inc (NYSE:DOW) has about $3.7 billion in cash and equivalents, up from $2.98 billion at the end of 2023. Over the past 12 months free cash flow came in at $2 billion, while cash from operations in $5 billion.
Dow Inc (NYSE:DOW) has a dividend yield of over 5%, and management is confident it can continue to deliver strong shareholder value, which shows the company has visibility on improvement in the future. During Q1 earnings call, Dow’s CEO Jim Fitterling said:
Over the past five years, we have worked hard to improve our balance sheet, to improve cash-flow conversion and to build a more resilient company that maintains consistent discipline. This was demonstrated when we delivered $12.4 billion in peak EBITDA in 2021, higher than any other timeframe in Dow’s history. This has created the opportunity for us to invest strategically at the bottom of the cycle for long-term profitable growth. And as implementation of our growth strategy increases our underlying EBITDA, we will continue to target at least 65% of operating net income to shareholders as we move up the next peak. This means at least 45% in dividends and 20% in share buybacks.
Overall, Dow Inc (NYSE:DOW) ranks 9th on Insider Monkey’s list titled Analyst Says These 10 Stocks Can Benefit if Donald Trump Wins US Election 2024. While we acknowledge the potential of Dow Inc (NYSE:DOW), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Dow Inc (NYSE:DOW) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
