Research from Water Tower Research, Water Tower Research

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.

Equity Research Firm

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<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

<ul><li>WTR-CMI keeping pace with broad markets. YTD, the S&amp;P 500 has appreciated 18%, compared with the 9.5% appreciation for the broader Russell 2000, while our WTR-CMI Index has improved 8.4%, held back primarily by lithium stocks, which are off anywhere from 37% for ALB to 68% for PLL.</li><li>Two companies in our index, RYAM and ECL, have outperformed even the tech-heavy S&amp;P 500, coming off a challenging 2023.</li><li>Unfortunately, with both lithium and ag markets still under pressure, we do not expect companies in our sector to outperform the broader markets in 2H24, although individual stock outperformance may continue.</li></ul>

WTR-CMI keeping pace with broad markets. YTD, the S&amp;P 500 has appreciated 18%, compared with the 9.5% appreciation for the broader Russell 2000, while our WTR-CMI Index has improved 8.4%, held back primarily by lithium stocks, which are off anywhere from 37% for ALB to 68% for PLL.Two companies in our index, RYAM and ECL, have outperformed even the tech-heavy S&amp;P 500, coming off a challenging 2023.Unfortunately, with both lithium and ag markets still under pressure, we do not expect companies in our sector to outperform the broader markets in 2H24, although individual stock outperformance may continue.

Mat-Chem Notes Caution - Canada Rail Strike, Weakening Ag-Chem Market, and Slower EV Adoption

<ul><li>Heavy lithium. Halfway through the year, the S&amp;P 500 has appreciated 15.4% YTD, driven by the strong performance of the Magnificent Seven, even as the remaining 490+ companies saw their stock prices move more in line with the Russell 2000, which itself posted an 7.8% gain YTD.</li><li>Over the same timeframe, the WTR-CMI Index delivered a disappointing 4.4% gain under the weight of lithium and graphite companies losing 36-62% of their value due to collapsing lithium and synthetic graphite prices, driven by slower growth of EVs and steel production and liquidation of excess inventories by customers, built over the course of 2022-23.</li><li><p>Sticky costs remain as pricing power wanes. Over the course of 2022-23, many companies experiencing a rapid rise in raw material costs, driven by higher petrochemical prices and rising costs of transportation and logistics aggressively raised prices in an attempt to preserve profits, if not profit margins. </p></li></ul>

Heavy lithium. Halfway through the year, the S&amp;P 500 has appreciated 15.4% YTD, driven by the strong performance of the Magnificent Seven, even as the remaining 490+ companies saw their stock prices move more in line with the Russell 2000, which itself posted an 7.8% gain YTD.Over the same timeframe, the WTR-CMI Index delivered a disappointing 4.4% gain under the weight of lithium and graphite companies losing 36-62% of their value due to collapsing lithium and synthetic graphite prices, driven by slower growth of EVs and steel production and liquidation of excess inventories by customers, built over the course of 2022-23.Sticky costs remain as pricing power wanes. Over the course of 2022-23, many companies experiencing a rapid rise in raw material costs, driven by higher petrochemical prices and rising costs of transportation and logistics aggressively raised prices in an attempt to preserve profits, if not profit margins. 

Mat-Chem Notes - Between a Rock and a Hard Place - 2H24 Outlook

<ul><li>We joined WTR’s Head of Business Development Tim Regan on this week’s Water Tower Hour Podcast to recap what happened in the chemicals and materials technology industries in 2023 and to provide an outlook for 2024.</li><li>Those interested can listen to the podcast on Apple Podcasts, Google Podcasts, Spotify, or on our website.</li><li>WTR-CMI in 2023. With the majority of stocks in our index finishing 2023 in positive territory, the WTR-CMI Index managed to keep pace with the Russell 2000, appreciating 15%.</li></ul>

We joined WTR’s Head of Business Development Tim Regan on this week’s Water Tower Hour Podcast to recap what happened in the chemicals and materials technology industries in 2023 and to provide an outlook for 2024.Those interested can listen to the podcast on Apple Podcasts, Google Podcasts, Spotify, or on our website.WTR-CMI in 2023. With the majority of stocks in our index finishing 2023 in positive territory, the WTR-CMI Index managed to keep pace with the Russell 2000, appreciating 15%.

Water Tower Hour Recap -  2023 Review and 2024 Outlook

<ul><li>Changes to WTR-CMI. Following the completion of Livent’s merger of equals with Allkem, the new company, with the new name Arcadium Lithium plc, is now trading under the symbols ALTM-NYSE and LTM-ASX, and has replaced LTHM in our index.</li><li>WTR-CMI last week. The S&amp;P 500 appreciated 1.2% last week, while the broader Russell 2000 managed to stay relatively flat, losing 0.3% of its value.</li><li>Our WTR-CMI Index declined 1.2%, dragged down by double-digit losses in lithium stocks and the continuing decline in the value of synthetic graphite maker EAF. </li></ul>

Changes to WTR-CMI. Following the completion of Livent’s merger of equals with Allkem, the new company, with the new name Arcadium Lithium plc, is now trading under the symbols ALTM-NYSE and LTM-ASX, and has replaced LTHM in our index.WTR-CMI last week. The S&amp;P 500 appreciated 1.2% last week, while the broader Russell 2000 managed to stay relatively flat, losing 0.3% of its value.Our WTR-CMI Index declined 1.2%, dragged down by double-digit losses in lithium stocks and the continuing decline in the value of synthetic graphite maker EAF. 

Mat-Chem Notes - For the Week Ended January 19, 2024

United States

The Sherwin-Williams Company manufactures, distributes, and sells paints, coatings, and related products.  The Company's products are sold to professional, industrial, commercial, and retail customers primarily in North and South America. Sherwin Williams also has additional operations in the Caribbean region, Europe and Asia.

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Sherwin Williams Co (SHW US)

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

Mat-Chem Notes Caution - Canada Rail Strike, Weakening Ag-Chem Market, and Slower EV Adoption

Unfortunately, with both lithium and ag markets still under pressure, we do not expect companies in our sector to outperform the broader markets in...

Water Tower Research

Mat-Chem Notes - Between a Rock and a Hard Place - 2H24 Outlook

Over the same timeframe, the WTR-CMI Index delivered a disappointing 4.4% gain under the weight of lithium and graphite companies losing 36-62% of...

Water Tower Research

Water Tower Hour Recap - 2023 Review and 2024 Outlook

WTR-CMI in 2023. With the majority of stocks in our index finishing 2023 in positive territory, the WTR-CMI Index managed to keep pace with the...

Water Tower Research

Mat-Chem Notes - For the Week Ended January 19, 2024

WTR-CMI last week. The S&P 500 appreciated 1.2% last week, while the broader Russell 2000 managed to stay relatively flat, losing 0.3% of its value.

Water Tower Research

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