ALB Rallied 7.5% In A Day. Have You Fully Evaluated The Risk?
Albemarle (ALB) stock is up 7.5% in a day. Already own the stock? Might want to consider the exit as there is risk – specific to growth, profitability and downturn resilience. Consider the following data:
- Size: A $10 Bil company with $5.0 Bil in revenue currently trading at $87.68.
- Fundamentals: Last 12 month revenue growth of -33.0% and operating margin of -4.6%.
- Liquidity: Has Debt to Equity ratio of 0.4 and Cash to Assets ratio of 0.1
- Valuation: Currently trading at P/E multiple of -11.1 and P/EBIT multiple of -11.0
- Has returned (median) 13.6% within a year following sharp dips since 2010. See ALB Dip Buy Analysis.
While we like to ride the momentum if the fundamentals check out – for ALB, see Buy or Sell ALB Stock – we are vary of bull traps. Specifically, it is worth trying to answer if things get really bad, and ALB drops 20-30% to $61.38 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience.
Below is a deep dive into Albemarle (ALB) downturn resilience – specifically, its performance vs the market during past crises? Turns out, the stock has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
Below are the details, but before that, as a quick background: ALB provides engineered specialty chemicals across Lithium, Bromine, and Catalysts segments, including lithium compounds, fire safety solutions, chemical synthesis additives, and industrial purification products.
2022 Inflation Shock
- ALB stock fell 65.2% from a high of $325.38 on 11 November 2022 to $113.26 on 5 December 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $152.39 on 26 December 2023 , and currently trades at $87.68
| ALB | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -65.2% | -25.4% |
| Time to Full Recovery | Not Fully Recovered days | 464 days |
2020 Covid Pandemic
- ALB stock fell 46.0% from a high of $94.31 on 20 February 2020 to $50.90 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 1 September 2020
| ALB | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -46.0% | -33.9% |
| Time to Full Recovery | 162 days | 148 days |
2018 Correction
- ALB stock fell 59.0% from a high of $144.58 on 8 November 2017 to $59.30 on 27 August 2019 vs. a peak-to-trough decline of 19.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 22 December 2020
| ALB | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -59.0% | -19.8% |
| Time to Full Recovery | 483 days | 120 days |
2008 Global Financial Crisis
- ALB stock fell 66.9% from a high of $47.76 on 31 October 2007 to $15.81 on 5 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 5 October 2010
| ALB | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -66.9% | -56.8% |
| Time to Full Recovery | 579 days | 1480 days |
Worried that ALB could fall much more? You could take a look at the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.