DWDP - Dow DuPont

[Gregmal]

I swapped this into BRK today. Its probably still good, but when you get 50% inside a year on a stock like Dupont, and then see Berkshire just sitting there like the fat girl at the end of the bar......

[longlake95]

That's a good idea Greg. Thanks... I'll think about that...

Are the lights on in the bar?

[BG2008]

For me, mostly because I own a decent position already.  Going OTM allows me to pick up quite a bit of exposure without adding a ton of capital.  Going ITM results in lower premium, but less overall exposure.  I bought some Berry Calls and LEAPs when it traded to the $37-38 range.  I bought the $45 and $47.50 calls and LEAPs.  Those are mostly ITM now.  It's kind of how my brain is wired.  I generally think if the re-shuffling of companies will reveal a price in the $80s-90s, then paying $3 for the $65 will likely serve you well.  Heck, who knows, maybe some of that cyclical actual grows for a change.  Although with the Corona Virus, it looks like it may not.  But there are literally rumors from Bloomberg that this company will be split into 4. 

Nothing is sacred at Ed Breen's DuPont.

If you ask me a year ago that we will go into full lockdown and somehow DD will come out with a $77 print today, I would probably tell you you're smoking some good dope.  The $65 LEAPs are about $12-13 today.  That $3 LEAP premium allowed me to increase my exposure by about 80% while just increasing my capital outlay by about 5%. I think if you are a small manager or an individual, you should consider using LEAPs to size up your positions when they fall in price or stay stagnant for a while.   Okay, let's not jinx ourselves now!!! I have Berry and DD LEAPs that will both expire in about 9 days and they are both almost 4x at this point.  I remember talking to another manager back in Mar and April and thinking that DD will be worth about $100 in 2022-2023 and I can buy it at $28/$30.  That's a triple in 2-3 years.  Somehow, I only bought an incremental 5-10%.  Say whatever you want, these specialty chemical companies are amazing businesses.   

[Gregmal]

That's a good idea Greg. Thanks... I'll think about that...

Are the lights on in the bar?

Always on.

[dwy000]

I swapped this into BRK today. Its probably still good, but when you get 50% inside a year on a stock like Dupont, and then see Berkshire just sitting there like the fat girl at the end of the bar......

That was pretty funny.  And accurate.

[longlake95]

what up DD?

[BG2008]

I have been thinking about whether I should exchange my DWDP for IFF.  You get 7.5% extra IFF shares.  But then I look at IFF valuation and I just can't stomach it.

[bbarberayr]

I've been trying to decide on the DD for IFF swap as well.  DD shareholders will almost certainly end up with some IFF shares through the clean-up process as it is very unlikely the trade for IFF share is fully subscribed and DD also indicates this in the document.  DD has 733 million shares and it would take 210 million to be tendered to fully subscribed.

Maybe the best approach is just to sit on my hands, get the IFF shares and hope that the value of these is more than the drop we see in DD (due to N&B being out of the company).

[BG2008]

That 7.5% premium in IFF is really interesting though.   I think there is a bit of technical where a lot of event driven funds are probably driving up prices of DD and shorting IFF for this trade.  Post deal, the rubber band may coil back the other way.  Gregmal probably knows this better.   I am kind of incline to tender almost all of my DD for IFF.   This is now one of my largest position through appreciation and also the $65 LEAPs being about $21 in the money.  At one point, I think the LEAP was about $1.00 late last year and that's been crazy 20 bagger.  My cost is about $3.50.  I kind of felt that this split off was going to unlock value and the volatility was unassuming before Covid.

I don't know why I haven't taken any chips off the table on the LEAPs.  Normally, I would pare it down. But I am glad so far that I haven't.  It probably has a lot to do with the LEAPs needing to go to end of Jan to qualify for long term cap gain.  So I may sell some DD shares and exercise the LEAPs and then exchange them for IFF.  I may actually tender 50% of my shares for IFF.  DD at below $30 was a steal of a life time. 

One thing that I have noticed about these specialty chemical companies is that they are very good businesses.  But they get really whipsawed during cresses.  So if you understand a few them well and wait for the deep sell off, I can they are great "wish list" companies because they actually could selloff and you can pick them up.   

[Gregmal]

I dont have a specific read here other than a general observation that Ive started to see with stuff like this, GM, etc. Kind of sleepy but decent companies showing signs of awakening. You can effectively remove the bulk of your position, free up most of the cash, and then go out the chain, 2022, 2023 with some OTM calls, for what I consider to be, peanuts. If my bull scenario plays out, the animal spirits may awaken these type of companies and in such a case they could easily rerate 2-3x higher over the next few years. A few weeks ago I re entered GM through some $50-60 2023 calls. I have nothing now, but was peaking around at the 2023 DDs as well. These things are NOT market resistant. We all see what they do when the market shits a brick. So basically being in cash with a call on ludicrous mode for pennies or dollars is IMO how I'd play it out.