The Dow Chemical Company (NYSE:DOW) wowing the bulls
Last week there was news that The Dow Chemical Company (NYSE:DOW) might be targeted by an activist investor and the bulls came rushing in. Option trading on the company touched it’s highest-level in 5 months. On Friday, over 89,000 stock-buying calls were recorded which was the highest number since February.
This amounted to 16-times the 4-week average and 6.9-times the number of the puts to sell. The $39 September calls accounted for 24% of the total options volume. The shares rose 3.1% and touched $38.04. This has been the highest they have risen since April. The weekly bullish-options that were due to expire towards the end of the week were also some of the most active options. The general feel in the market is that investors are expecting some sudden change that will boost the stock to its peaks.
A DuPont repeat?
In an email, the OptionsHawk.com founder, Joe Kunkle said that though the stock is an underperforming one, it is valued very attractively. He said that there is also plenty of space to trim all the excesses through asset sales. This will help in unlocking shareholder value. DuPont was the other company that experienced similar activity last month.
Last month, DuPont said that it is contemplating a sale or a spin-off of its performance-chemicals unit. The company said that it will divert its focus to less-cyclical products. This will help in boosting shareholder returns. Nelson Peltz, the activist investor has assimilated a massive stake in the company.
Over the last 12 months, DOW earned around 7 cents of operating-profit for each dollar of its sales. This has been the very lowest margin-point amongst its peers. No comments were forthcoming from the company. DOW combines technology and science to innovate products that are important for human progress.