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Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

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<ul><li>WTR-CMI in 2024. Last year was difficult for specialty chemicals and materials stocks, with our WTR-CMI Index posting a rather modest 5% gain for the year, affected by &gt;40% Y/Y declines in lithium stocks.</li><li>The index’s performance was well off the pace of the Russell 2000 and S&amp;P 500, which posted returns of 10.8% and 24%, respectively, driven by the extraordinary gains of the “magnificent seven” tech and media stocks.</li><li>On a positive note, RYAM’s stock price nearly doubled during the year, driven by an <span style="font-size: var(--content-font-size);">improving pricing environment, better sales mix, and cost </span>containment efforts, as well as the ramp-up of the company’s Biomaterials business. </li></ul>

WTR-CMI in 2024. Last year was difficult for specialty chemicals and materials stocks, with our WTR-CMI Index posting a rather modest 5% gain for the year, affected by &gt;40% Y/Y declines in lithium stocks.The index’s performance was well off the pace of the Russell 2000 and S&amp;P 500, which posted returns of 10.8% and 24%, respectively, driven by the extraordinary gains of the “magnificent seven” tech and media stocks.On a positive note, RYAM’s stock price nearly doubled during the year, driven by an improving pricing environment, better sales mix, and cost containment efforts, as well as the ramp-up of the company’s Biomaterials business. 

Mat-Chem Notes - Looking Ahead by Looking Back at 2024

<ul><li>Elections have consequences. The November 2024 elections in the US have ushered in not just a change in political landscape for the country and the makeup of the federal government but are likely to result in material changes to government policies and priorities for 2025 and beyond.</li><li>These include international trade, the federal regulatory environment, and tax policies that can affect consumer sentiment, company strategies when it comes to capital deployment, and end market dynamics.</li><li>While specifics could emerge in the coming months, we expect modest inflationary pressures from expected tariffs on imported goods to be largely offset by more constructive energy policies, tax incentives, and a reduced federal regulatory burden, along with a reduced federal government role in economic decision-making to lead to an improvement in economic growth in 2025.</li></ul>

Elections have consequences. The November 2024 elections in the US have ushered in not just a change in political landscape for the country and the makeup of the federal government but are likely to result in material changes to government policies and priorities for 2025 and beyond.These include international trade, the federal regulatory environment, and tax policies that can affect consumer sentiment, company strategies when it comes to capital deployment, and end market dynamics.While specifics could emerge in the coming months, we expect modest inflationary pressures from expected tariffs on imported goods to be largely offset by more constructive energy policies, tax incentives, and a reduced federal regulatory burden, along with a reduced federal government role in economic decision-making to lead to an improvement in economic growth in 2025.

The US Elections' Impact on 2025 Outlook - November 13, 2024

<ul><li>WTR-CMI this week. In a tough week for the market, the WTR- CMI Index of 30 specialty chemicals and materials technology stocks dipped 0.6%, while the large-cap heavy S&amp;P 500 declined 1.4%, with the Russell 2000 inching up 0.1%.</li><li>Strong rebounds in NGVT, ECVT, LAC, PLL, and AXTA nearly offset sharp declines in EAF, CMP, and HXL. YTD, our index is slightly outperforming the Russell 2000, increasing 10.4% versus the broader index’s 9.0% improvement, although both trail the S&amp;P 500’s 20.1% increase.</li><li>On a Y/Y basis, the WTR-CMI Index has narrowed the performance gap with the S&amp;P 500, improving 32.9% versus the large-cap index’s 35.2% appreciation, with the Russell 2000 bringing up the rear with a 32.4% rebound.</li></ul>

WTR-CMI this week. In a tough week for the market, the WTR- CMI Index of 30 specialty chemicals and materials technology stocks dipped 0.6%, while the large-cap heavy S&amp;P 500 declined 1.4%, with the Russell 2000 inching up 0.1%.Strong rebounds in NGVT, ECVT, LAC, PLL, and AXTA nearly offset sharp declines in EAF, CMP, and HXL. YTD, our index is slightly outperforming the Russell 2000, increasing 10.4% versus the broader index’s 9.0% improvement, although both trail the S&amp;P 500’s 20.1% increase.On a Y/Y basis, the WTR-CMI Index has narrowed the performance gap with the S&amp;P 500, improving 32.9% versus the large-cap index’s 35.2% appreciation, with the Russell 2000 bringing up the rear with a 32.4% rebound.

Mat-Chem Notes - Supply-Demand Balancing Act and Geopolitics of Energy Transition

<ul><li>WTR-CMI last week. Driven by the recovery in lithium stocks, our WTR-CMI index of 30 specialty chemicals and materials technology stocks rose 1.7% for the week, handily outperforming mostly flattish performance of large cap tech-heavy S&amp;P 500 as well as the broader Russell 2000 indices.</li><li>YTD the WTR-CMI continues to outperform the Russell 2000 (13.6% vs. 9.8%) and on YoY basis our index nearly kept up with S&amp;P 500’s strong 33.8% rise by appreciating 31.1% compared to Russell 2000’s 24.6% improvement.</li><li>Hurricane season kicks into high gear. While the impact of hurricane Helena are still being assessed, Francine’s impact on oil and gas production and barge traffic are already being felt in the markets, with gulf coast oil production down nearly 40% and natural gas production down nearly 50%, with barge fleets staying away from the region until weather settles, which now looks to be delayed due to Helena’s destructive path.</li></ul>

WTR-CMI last week. Driven by the recovery in lithium stocks, our WTR-CMI index of 30 specialty chemicals and materials technology stocks rose 1.7% for the week, handily outperforming mostly flattish performance of large cap tech-heavy S&amp;P 500 as well as the broader Russell 2000 indices.YTD the WTR-CMI continues to outperform the Russell 2000 (13.6% vs. 9.8%) and on YoY basis our index nearly kept up with S&amp;P 500’s strong 33.8% rise by appreciating 31.1% compared to Russell 2000’s 24.6% improvement.Hurricane season kicks into high gear. While the impact of hurricane Helena are still being assessed, Francine’s impact on oil and gas production and barge traffic are already being felt in the markets, with gulf coast oil production down nearly 40% and natural gas production down nearly 50%, with barge fleets staying away from the region until weather settles, which now looks to be delayed due to Helena’s destructive path.

Mat-Chem Notes -  Hurricanes, Port Strikes, Geopolitics, and Crosscurrents in EVs

<ul><li>WTR-CMI last week. In a down week for the market, with both the S&amp;P 500 and Russell 2000 declining 4.2% and 5.7%, respectively, 29 of the 30 stocks in our WTR-CMI Index likewise saw their prices fall 4.0%, with AVD being the only exception, appreciating 9.1% for the week.</li><li>YTD, the S&amp;P 500, heavily weighted toward tech and internet stocks, has increased 13.4%, while our WTR-CMI Index has increased 7.2%, outperforming the broader Russell 2000’s 3.2% rise, despite lithium stocks’ 50%- <span style="font-size: var(--content-font-size);">plus declines.</span></li><li>Recycled plastics market gaining acceptance. LYB announced the acquisition of German APK AG, a mechanical plastics recycler to bolster its circular economy and low-carbon credentials, while AVTN launched a pigment additive for plastics used in automotive plications made from recycled tires, as an alternative to carbon black, again aiming at helping its customers reduce their carbon impact while improving its own circular economy efforts.</li></ul>

WTR-CMI last week. In a down week for the market, with both the S&amp;P 500 and Russell 2000 declining 4.2% and 5.7%, respectively, 29 of the 30 stocks in our WTR-CMI Index likewise saw their prices fall 4.0%, with AVD being the only exception, appreciating 9.1% for the week.YTD, the S&amp;P 500, heavily weighted toward tech and internet stocks, has increased 13.4%, while our WTR-CMI Index has increased 7.2%, outperforming the broader Russell 2000’s 3.2% rise, despite lithium stocks’ 50%- plus declines.Recycled plastics market gaining acceptance. LYB announced the acquisition of German APK AG, a mechanical plastics recycler to bolster its circular economy and low-carbon credentials, while AVTN launched a pigment additive for plastics used in automotive plications made from recycled tires, as an alternative to carbon black, again aiming at helping its customers reduce their carbon impact while improving its own circular economy efforts.

Mat-Chem Notes - Weakness of Industrial, Ag, and EV Markets Leaves Few Options

Canada

Lithium Americas Corp. operates as a mining company. The Company mines, produces, and supplies lithium. Lithium Americas conducts its business operations in Argentina and Canada.

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Lithium Americas (LAC US)

Mat-Chem Notes - Looking Ahead by Looking Back at 2024

Last year was difficult for specialty chemicals and materials stocks, with our WTR-CMI Index posting a rather modest 5% gain for the year, affected...

Water Tower Research

The US Elections' Impact on 2025 Outlook - November 13, 2024

While specifics could emerge in the coming months, we expect modest inflationary pressures from expected tariffs on imported goods to be largely...

Water Tower Research

Mat-Chem Notes - Supply-Demand Balancing Act and Geopolitics of Energy Transition

In a tough week for the market, the WTR- CMI Index of 30 specialty chemicals and materials technology stocks dipped 0.6%, while the large-cap heavy...

Water Tower Research

Mat-Chem Notes - Hurricanes, Port Strikes, Geopolitics, and Crosscurrents in EVs

Driven by the recovery in lithium stocks, our WTR-CMI index of 30 specialty chemicals and materials technology stocks rose 1.7% for the week

Water Tower Research

Mat-Chem Notes - Weakness of Industrial, Ag, and EV Markets Leaves Few Options

YTD, the S&P 500, heavily weighted toward tech and internet stocks, has increased 13.4%, while our WTR-CMI Index has increased 7.2%, outperforming...

Water Tower Research

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