Five Reasons to Own Huntsman

I've been waiting for a chance to buy Huntsman (HUN - commentary - Cramer's Take), and that day has come. This is the moment where all those who were only in this chemical play for the Apollo lawsuit are finally gone. The stock took a beating yesterday as investors sold this thing off 50% down into the $2s as its future now is set as a stand-alone company. While most investors are heading to the exits, I am going to start averaging in. Here's why:

Hit by Outlier Events

First of all, Huntsman has been severely affected by short-term outlier events. Some of its facilities were inoperable for weeks because of hurricanes Gustav and Ike, costing the company $49 million in the third quarter. This came on top of the bubble-inflated commodity costs that the company has been dealing with for the past year.

On a year-over-year basis, Huntsman costs were higher by $360 million because crude oil was up 56% year over year and natural gas was up 70% over 2007 levels. Huntsman is a beneficiary of the current commodity environment.

Growing Revenue

Despite the global economic slowdown, Huntsman is still growing revenue at 12%. Revenue growth is the most important metric during a recession, and over the past 12 months, Huntsman has been able to increase its average selling prices for its flagship performance products by 34%. Pricing power looks very strong; CEO Peter Huntsman remarked, "We continue to enjoy strong demands for these products."

Earnings might not be as bad as they seem, either. Investors are very nervous because of last quarter's net income loss of $1.9 million, but consider that third-quarter adjusted EBITDA excluding the hurricane impact and other merger-associated expenses was $243 million -- significantly greater than the second quarter's $210 million.

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At the time of publication, Schwarz was looking to begin a position in HUN.

Jason Schwarz is the options strategist for Review Services Inc., an investment advisory firm for professional athletes located in Marina Del Rey, Calif. Specializing in option LEAPS, Schwarz has used this investment vehicle to successfully manage risk during bear markets and to exploit growth opportunities during bull markets.