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As technology and financial stocks hog the spotlight, other sectors are on sale. Since March, the
has gained 41% and the
Russell 1000 Financial Services Index
has surged 81%. The
S&P 400 Specialty Chemicals Index
falls between those two. The following small-cap specialty-chemicals stocks offer compelling stories, fundamentals and value.
, based in Richmond, Virginia, develops chemical additives that enhance the performance of petroleum products and make fuels burn cleaner, engines run smoother and machines last longer. It's a decent pitch, right? As the government clamps down on fuel emission standards, and oil and car companies shift their focus toward so-called clean energy, this company is an obvious winner. TheStreet.com Ratings upgraded NewMarket to "buy" less than a month ago.
The company's heritage dates to 1887 as a paper-manufacturing company. In 1921, a partner firm discovered that a certain combination of chemicals added to gasoline could reduce engine "knock." A joint venture between
( GMGMQ) and
, now known as
, was created two years later.
NewMarket's first-quarter sales fell 12% to $337 million, but earnings per share climbed 48% as its operating margin almost doubled. The company has a strong financial position, as reflected by a $59 million cash balance. NewMarket's stock is trading at a discount in the specialty chemicals industry on the basis of earnings, sales, book value and cash flow. With a price-to-earnings ratio of 14.1, NewMarket is 29% cheaper than its average peer. The stock has doubled this year.
manufactures and markets colors, flavors and fragrances. During a tumultuous 2008 for most companies, Sensient managed to improve earnings per share in all four quarters on a year-over-year basis. It has extended its strong performance into 2009, boosting EPS by 5% even as revenue fell 8% to $283 million in the first quarter. The company has an adequate liquidity position, as reflected by $8 million of cash.
Like NewMarket, Sensient traces its roots to the 1880s. Founded as a distillery, it now helps food and beverages companies, among others, improve flavors.
The selling point for Sensient is its share value. The stock is trading at a discount in the specialty chemicals industry on the basis of earnings, sales, book value and cash flow. With a price-to-earnings ratio of 12, Sentient is 38% cheaper than its average peer. The stock also offers a 3.22% dividend yield, more than most small companies'. The stock has fallen 1% this year.
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