LyondellBasell is one of the world’s largest chemical and plastics companies.
Why I Would Buy
1. Cheap – LyondellBassell’s stock is currently selling for < 9x forward earnings.
2. Strong Returns on Equity – As visitors to this site know RoE is my favorite metric for evaluating stocks. LYB has delivered an eye-popping 50% returns on equity during the past 5 years!
3. Low Payout Ratio – The dividend is a respectable 3%, with a payout ratio below 30%.
4. Good Credit Ratings – Long term debt of the company is rated investment grade by all three rating agencies.
What Could Go Wrong
1. High COGS (Cost of Goods Sold) – LyondellBassell has incredibly high COGS, approaching80% of revenue. Even small increases in cost of raw materials will significantly eat into profits.
Disclosure: I am long LYB, please read additional disclosures here before taking any action based on this post.