Materials equities look ready to gain as inflation pressures build.
The Candidate Pool
2017 Status
P/E
PEG (5 yr)
PPB
PPS
Ecolab (ECL)
Base
29.38
2.33
5.37
2.87
DowDupont (DWDP)
Base
24.99
2.83
1.62
2.12
FMC Corp (FMC)
Breakout
38.96
2.08
5.99
4.59
International Paper (IP)
Base
19.86
1.48
4.87
1.06
PPG Industries (PPG)
Base
19.81
2.07
5.04
2.06
Vulcan Materials (VMC)
Accumulator
45.94
2.47
3.62
4.45
Bemis Co. (BMS)
Accumulator
19.51
3.94
3.40
1.08
2017 Status
Debt/Equity
5-yr Yield
Payout Ratio
Ecolab
Base
103.54
1.08%
33.41%
DowDupont
Base
35.30
3.19%
91.09%
FMC Corp
Breakout
79.95
1.05%
31.13%
International Paper
Base
249.97
3.20%
85.28%
PPG Industries
Base
78.29
1.41%
32.04%
Vulcan Materials
Accumulator
60.08
0.37%
34.30%
Bemis Co.
Accumulator
121.60
2.51%
56.67%
Since Donald Trump’s election there has been a sharp divergence in the performance of S&P equities relative to commodity prices. Traditionally, profitable companies sell more goods and services and enjoy higher equity prices; increased production of goods and services drive higher commodity prices as demand on finite resources increases. However, commodity prices have struggled to return to levels 20 years ago despite the S&P trading at new multi-year highs and at multiples it traded at 20 years ago. The divergence between commodity and equity prices since Trump’s election has been driven by the removal and weakening of environmental standards by the current Administration following the appointment of climate-change skeptic and industrial fave, Scott Pruitt, to the EPA. But as with any legislative change, real change comes slowly and it’s unlikely the current commodity discount and divergence can continue without some form of re-alignment.
