Tuesday August 28, 2012
by Neil Macneale, editor 2-or-1 Stock Split Newsletter
Our investment strategy is to add one stock to our portfolio each month -- chosen exclusively from among stocks that have made 2 for 1 split annoucements.
And while, there were no new splits announced in July, we are adding specialty chemical company Tronox (TROX), which announced its split at the end of June, to our portfolio.
Tronox Limited is a specialty chemical company producing titanium dioxide and other chemicals. Titanium dioxide is a white pigment used in paint and other coatings and provides 93% of the company’s net revenues.
Its other products include electrolytic manganese dioxide, sodium chlorate, boron trichloride, elemental boron, and lithium manganese oxide, all specialty chemicals used in batteries, airbag detonators, paper, semiconductor and pharmaceutical manufacturing.
The rather brief history of TROX is complicated. Spun off from Kerr-McGee in 2005, the company filed for bankruptcy in 2009.
Emerging from bankruptcy in 2011, Tronox immediately entered into a merger/acquisition deal with Exxaro Mineral Sands, a mining company supplying Tronox’s raw materials.
This reconstituted company began trading on the NYSE only just this June and soon thereafter announced a 5 to 1 stock split, a stock buyback plan, and commencement of a regular dividend payout.
All this says “high risk” to me, but the fundamentals say “this stock is a steal.” TROX is trading at a price to book of 1.52. It’s paying a 4.2% dividend and is currently less volatile than the overall market. It absolutely buries its competitors when comparing any measure of profit or return.
These numbers are based on a very short history, so could change dramatically over the next 2½ years.
My best guess is, however, TROX will be a case of high risk and high reward. Overall I believe the stock provides an interesting opportunity for our portfolio.
Learn more about this financial newsletter at Neil Macneale's 2-or-1 Stock Split Newsletter.