(B)(N) DOW Dow Chemical Company

Drama. The Dow Chemical Company is in Court this week under a privately initiated possibly $3 billion complaint regarding “price fixing” (Reuters, January 16 2013, Dow prepares to defend itself in billion-dollar antitrust trial). Investors have shrugged this off and the stock price has remained steady to increasing from $30 in December to the current $33. Dow Chemical is also trading above the Risk Price (SF) and is therefore in the current Perpetual Bond™ for the S&P 500 NYSE companies (please see Exhibit 1 below). The stock price was up +14% in 2012 and the company pays a current dividend of $1.28 per share or $1.5 billion per year to its shareholders for a current yield of 3.8%. And of course we are concerned to protect this stock in our portfolio in contrast to the volatility players and capital asset pricing modellers who might just “lighten up” or exit entirely and have the returns to show for it. Random. Please see, for example, our previous Posts, Wallywood and The Baypatch, January 2013 and The Active Investor (DOA), November 2012, for a brief introduction to the “I’m sorry” state of the “alternatives in investing”.

Our estimated downside due to volatility is minus ($3) but it is prudent to protect our current prices by buying the March put at $33 for $0.90 per share and shorting or selling the March call at $36 for $0.40 per share so that for a net cost of $0.50 per share ($0.90 less $0.40) today we are assured of no less than $33 and no more than $36 for the next three months .

Exhibit 1: (B)(N) DOW Dow Chemical Company – Risk Price Chart

Dow Chemical Company is a manufacturer and supplier of products used primarily as raw materials in the manufacture of customer products and services industries including appliances, automotive, agricultural and building and construction.

(Please Click on the Chart to make it larger if required.)

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of  investment lore. We have just one product

The Perpetual Bond™
“Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.