DWDP - Dow DuPont

[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.

[BG2008]

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.

 

I have increasingly look to this method of capturing exposure while limiting downside.  This is exactly what Nassim Taleb talk about his 90/10 or 80/20.  It's probably better to have 10-20% in LEAPs on various sleepy large caps that may awaken.  Maybe I should just swap my Berry Exposure to LEAPs.  VNO maybe a good candidate as well.  I don't think it re-rates until people move back into offices.  These companies can kind of lull investors into sleep.  Heck, even I get a little worn down after being in Berry for 3 years.  I find that I generally get "tired" after 3 years being in a name and not having it work. 

[Gregmal]

Yea I try to look at things as if you have a carpenters tool belt. In that belt is everything you need to handle the current market environment. You have your stock, bonds, derivates, etc. The key is finding the most efficient way to accomplish whatever it is that you are setting out to do. With DD, my objective was really just a drama free, better than average-ish large cap return. Sans the covid things, 50%+ in under a year is hard to argue with. But from here, if the goal is 10-15% of drama free return, theres plenty else like BRK or mf REITs where I think I can achieve that with much less risk. If my objective is playing DD for a rerating, then you can go up the chain, reducing your outlay while still having the trade on, just less exposure. GM is a perfect example of this. I held the stock for years. Had a negligible return but ultimately it was a waste of time. But the entire time there were rerating pitches and even in 2015 I remember hearing and seeing a credible path to $100. If AAPL can go from 12x to 40x in a few years, so can these things. I wouldn't be shocked if GM was $150 in a couple years should things get nutty. $4-5 for a call on that is free money if you do it enough. 

[rogermunibond]

What's the issue with IFF over the past few years?  Organic growth seems tepid, capital allocation to buy N&B from DD is meant to recharge rev/earnings growth?

 

IFF seems like it should be in a high moat business but seems to be grossly underperforming.

[BG2008]

Sold out of all of my DD Jan 15th Calls for about $17 versus a $3.50 cost basis.  Had to take my daughter to the pediatrician and missed out on selling at $21 to $22.  Kids are expensive!!!!