Buy The Chemours Company- New Wave of Demand for Opteon

By Linda McDonough • March 12, 2018

Buy The Chemours Company (NYSE: CC)

Target: $75

Buy Up To: $56

Options Trade: Buy to open the July 20, 2018, call on The Chemours Company (NYSE: CC) with a strike price of $50 at $5.00 or lower. Symbol (CC180720C50)

I sold The Chemours Company out of the portfolio in January at $53, due to my fear that there would be a pause in sales of the company’s Opteon refrigerant product that would mar the company’s fourth-quarter earnings report.

No such thing happened. Chemours reported a terrific quarter in mid-February. Revenue beat by $22 million and earnings were 26% higher than expected and enthusiasm for the company’s “green” cooling agents is still running high.

Most exciting to me is that management noted a new channel of demand opening up for its environmentally sustainable Opteon refrigerant.

Although the company might see less demand from European auto manufacturers due to the passing of mandate deadlines, a new wave of demand is emerging from U.S. automakers and European commercial refrigerator customers.

Management specifically called out 20,000 European supermarkets that they expect to be using Opteon by 2020.

In addition, revenue and profits from its Titanium coatings chemical are skyrocketing. Revenue from this product line now makes up almost half of Chemours’ revenue and grew 26% last quarter. Higher volumes and pricing are driving profits up even faster for this segment.

While it is not my intention to trade in and out of names, it seemed like a reasonable move to lock in the 92% gain we had in The Chemours going into this quarter.

Earnings estimates are up significantly and even assigning a lower P/E (price to earnings) ratio on the stock due to some investors considering it a cyclical name, I still arrive at a $75 valuation.

On the option expiration: Chemours will not report its next quarter until the first week of May. The closest expiration date that encircles that date is the July series. You have some time to execute the options trade so I don’t recommend chasing the price if the market is especially strong today.

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Tim Lewis

03/13/18 ‐ 10:29am ET March 13, 2018 at 10:29am ET

CC July20 50Call filled $4.95

Jeffrey J

03/13/18 ‐ 1:44pm ET March 13, 2018 at 1:44pm ET

Filled @ $5.00 at TradeStation.

William G.

03/13/18 ‐ 1:44pm ET March 13, 2018 at 1:44pm ET

Filled at $5 early this morning.

Thanks

Abhi A

03/13/18 ‐ 2:03pm ET March 13, 2018 at 2:03pm ET

Hi Linda,
Are you sure about this one? The stock is falling a lot today. 2% down.

Abhi A

03/13/18 ‐ 4:04pm ET March 13, 2018 at 4:04pm ET

filled at 4.60 @fidelity

Linda McDonough

03/14/18 ‐ 10:05am ET March 14, 2018 at 10:05am ET

Abhi,
As someone who has worked with stocks for over 25 years, there is no such thing as sure. There is confidence in a position that comes from diligent research. I feel strongly that the Chemours has a unique position as one of two providers of the required environmentally friendly coolant and that management has done a great job at managing the risks in the story.
Best,
Linda

Rick

03/13/18 ‐ 3:43pm ET March 13, 2018 at 3:43pm ET

I bought the July 50 calls in two separate transactions (yesterday and today) that average $5.00.

Stanley

03/14/18 ‐ 12:09pm ET March 14, 2018 at 12:09pm ET

CC filled in 2 trades for $4.95

Paul

03/14/18 ‐ 1:54pm ET March 14, 2018 at 1:54pm ET

Filled at $4.60 Db on Fidelity

ETKTRIDE

03/15/18 ‐ 1:23pm ET March 15, 2018 at 1:23pm ET

CC filled @ $4.25 DR – IB

Howard

03/22/18 ‐ 11:33am ET March 22, 2018 at 11:33am ET

CC180720C50 filled at $3.60 in case anyone still wants in.

Howard

03/23/18 ‐ 10:01am ET March 23, 2018 at 10:01am ET

CC filled at 47.70

Spike

03/23/18 ‐ 11:57am ET March 23, 2018 at 11:57am ET

paid 3.50 for the July 50 call on CC.

David

04/17/18 ‐ 11:23am ET April 17, 2018 at 11:23am ET

Any thoughts on July 50 call profit targets on CC …

Linda McDonough

04/18/18 ‐ 10:33am ET April 18, 2018 at 10:33am ET

David,
I’m watching them closely. They are not very liquid but I am surprised they are only flat with our entry price based on the level of the stock. They don’t expire until July so I’m hoping for at least a 20% gain before then. A target, not a promise!
Best,
Linda

Abhi A

05/10/18 ‐ 10:27am ET May 10, 2018 at 10:27am ET

What do you think is going on with Chemours Linda? The earnings looked great but the stock is not moving.

Linda McDonough

05/10/18 ‐ 12:12pm ET May 10, 2018 at 12:12pm ET

I think it’s getting lumped in with the industrials group which is seeing some rotation as investors who think the economy has seen its best days are cycling out. I am doing my darndest to see what group they are moving into but it’s not obvious.
I expect CC to regain its footing as it is in a unique position.
Best,
Linda

Dave G.

05/10/18 ‐ 12:12pm ET May 10, 2018 at 12:12pm ET

Any update on the cc july call option since your comments on april 18 . thanks

Linda McDonough

05/10/18 ‐ 12:13pm ET May 10, 2018 at 12:13pm ET

Dave,
See my comments below. I’m no less bullish on the stock.
Linda

Matt H

06/20/18 ‐ 10:14am ET June 20, 2018 at 10:14am ET

I was wondering about the call options for July 20th. Given that the price of the options is down to $0.50 today, would it make sense to acquire additional option positions to reduce the overall cost per option? I am assuming the CC July call is still a worthwhile investment at this point, but the value has gone down quite a bit. Are there any further expected announcements or developments that might boost the stock price in the face of all the bad news for the market lately?

Rick

06/20/18 ‐ 2:10pm ET June 20, 2018 at 2:10pm ET

I am more inclined to rolling the options to a later date than to double down on the July expiration. I haven’t decided to do so yet, but that is my inclination.

Linda McDonough

06/20/18 ‐ 6:19pm ET June 20, 2018 at 6:19pm ET

Matt et al.-
I do not recommend doubling down on the July options. As you get closer to the expiration date the time value or time premium on the options disintegrates rapidly. You would only do this if there was an event before expiration that you were making a bet on.

I think Chemours has been dragged down due to tariff issues- about 24% of Chemours revenue is from Asia-Pacific and a good deal of it is linked to automotive and industrial products. As the product has few substitutes I don’t see this a problem fundamentally but more of a psychological rift.

The next event I see for the company is second quarter earnings in early August. I am reviewing the options series and will have an update for you shortly.
Best,
Linda

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