The following is an excerpt from Best Stocks for 2019: LyondellBasell Stock Will Take the Crown. LyondellBasell is my selection in InvestorPlace’s Best Stocks for 2019 Contest.
My pick in Best Stocks for 2019 is LyondellBasell (LYB), one of the largest plastics, chemicals and refining companies in the world. It’s also one of the cheapest stocks in the S&P 500, has strong insider buying, and has a fantastic history of taking care of its shareholders via dividend hikes and well-timed share repurchases.
If you’re not familiar with the company, LYB produces everything from food packaging to water pipes and auto parts. Additionally, the company is one of the largest crude oil refiners in the United States and produces gasoline, diesel fuel, jet fuel and assorted lubricants. The company sells its products in more than 100 countries and made the 2018 list of “Most Admired Companies” by Fortune magazine.
Energy stocks have been beaten up of late due to the falling price of crude oil. With global demand looking suspect and suppliers stronger than ever, the price of crude oil is down by about a third since the beginning of October.
But that’s hardly a bad thing for LyondellBasell. Lower prices for crude oil and natural gas liquids means lower cost of feedstock for the chemicals and refining businesses and thus higher profits.
Not that profits have been in short supply. Over the past five years, LyondellBasell stock has averaged a return on equity of nearly 60%. Net margins fluctuate based on the economic cycle but have averaged in the mid-teens since 2015. Over the trailing 12 months, net margins have held steady at 15.01%.
Despite its financial health, it’s hard to find too many large-cap stocks that are as cheap as LYB stock. The company trades at a trailing price-to-earnings ratio of just 6.02 and a forward P/E of just 8.05. Compare that to the S&P 500’s trailing and forward P/E ratios of 21.98 and 15.1, respectively.
To continues reading, see Best Stocks for 2019: LyondellBasell Stock Will Take the Crown.