Dupont, an interesting beaten down blue chip

We recently purchased Dupont, sub $70, as stock is flirting at the lowest level all year.  The sell off is ironic because it was due to activist Nelson Peltz’s failed board seat proxy.  Peltz insisted he was keeping his stake and a couple of insiders added to theirs yet the stock moved lower.  The company is spinning of a performance chemical unit July 1. and investors will own a piece of this as well. 

In last week’s Barron’s Round Table, famed investor Brian Rogers wrote “You never want to make bold statements, but based on what happened at DuPont [DD], I can’t imagine it underperforms in the next year. CEO Ellen Kullman and the board came under intense pressure due to a proxy battle launched by Nelson Peltz’s Trian Fund Management. In the end, DuPont won, and Trian failed to get seats on the board.

DuPont has been repositioning its portfolio. It sold its coatings business a few years ago, and is spinning off part of the traditional chemicals business. Management will pull out all the stops to generate good shareholder returns. DuPont is a 200-year-old blue chip. The financials are strong. The shares yield 2.8%, and aren’t expensive. The stock is a good play for a conservative investor.

Where will growth come from?

DuPont will grow as markets around the world grow. The company’s agriculture and nutrition business is probably growing faster than gross domestic product. The same is true for specialty materials. DuPont has tried to focus on faster-growing industries. If all goes well, it will raise the dividend and buy back shares.