Blogvesting

Dow Chemical requires no introduction. Buffett financed Dow’s acquisition of Rohm and Haas with a convertible bond yielding 8.5% and convertible at a share price of $41. There is some debate about whether Dow overpaid for its new acquisition, but the consensus is that the company has a better product mix and market share after the acquisition, and should be able to afford both the added debt and its regular dividend. The company is raising the prices of its products across the boar. d to fend off inflation, and that should take pressure off earnings. There is strong support for the stock at around $32, which is around 10 times trailing earnings, a very cheap price for a quality company. I bought my position at $33.95, mainly because I feel that there is a fairly good chance that the stock will move close to the $40 mark in the near future, especially with declining oil prices. Even if my gut feeling doesn’t pan out, I am prepared to wait it out while collecting 4.95% in dividend.