Wall Street's axiom is to invest in companies that make products everyone needs, and what is more basic than air?
Praxair (PX) produces oxygen as part of its wide-moat product portfolio, which includes atmospheric gases, ceramic and metallic coatings and powders, and process gases such as carbon dioxide and helium.
The company, which boasts above-average net margins and returns on assets and equity, is a basic materials play, often misunderstood by investors. Praxair shares were about flat in Tuesday trading.
And yet, those who appreciate the importance of Praxair's sudden surge can detect a deeper undercurrent: a push for manufacturing activity in the U.S. and elsewhere.
The stock has gained about 15% this year, thanks to healthy dividends and stable earnings amid a sluggish economy.
With more than $10 billion in annual sales, Praxair is recognized as one of the most prominent names in its niche industrial gas sector.
The company's rivals include Airgas, Air Products and Chemicals, L'Air Liquide and Linde.
A potential merger with Linde was a possibility for a while this year, until the $60-billion combination was called off.
To be sure, the landscape around Praxair hasn't been positive; slow economic growth has weakened demand in the manufacturing, metals and energy sectors, the core customer segment for industrial gas firms. Also, with over 50% of revenues coming from the other side of the Atlantic, and a growing Asia business, Praxair, is vulnerable to the struggles of global customers, including Procter & Gamble and Pfizer.