Dow Chemical

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While it may lack the excitement factor of a satellite radio operator or a famous software firm, Dow Chemical ( DOW) is no stranger to being a household name. Since its start in 1897, Dow has become one of the largest chemical and materials firms in the world, creating brands such as Styrofoam, and having a hand in nearly every industry imaginable. Dow's scale and diversification make it a formidable blue chip name with the hefty 3.3% dividend yield you'd expect to go along with it.

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Like other chemical firms, Dow has spent the last few years positioning itself for the future. The firm's considerable exposure to the agrichemical business and specialty materials used by technology manufacturers are evidence of that. The shift means that Dow's focus has changed from selling lots of basic chemicals (with no competitive advantage and lots of rivals) to focusing more on materials where it has a moat and can collect bigger margins for its efforts. Investors should applaud those efforts.

Meanwhile, Dow still has considerable operations making more legacy products like plastics and basic chemicals. But recent pressure on commodity prices (particularly natural gas) has helped to shove margins higher by trimming input costs at the same time that inflation was boosting soft commodity prices. With net margins deep in the double digits, and a well-capitalized balance sheet, DOW is in good shape to end the year on a high note.

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-- Written by Jonas Elmerraji in Baltimore.


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At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji

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