Research from Water Tower Research, Water Tower Research

Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Research from Water Tower Research

Equity Research Firm

Thematic (Sector/Industry)

United states Materials / Thematic (Sector/Industry)

<ul><li>Heavy lithium. Halfway through the year, the S&amp;P 500 has appreciated 15.4% YTD, driven by the strong performance of the Magnificent Seven, even as the remaining 490+ companies saw their stock prices move more in line with the Russell 2000, which itself posted an 7.8% gain YTD.</li><li>Over the same timeframe, the WTR-CMI Index delivered a disappointing 4.4% gain under the weight of lithium and graphite companies losing 36-62% of their value due to collapsing lithium and synthetic graphite prices, driven by slower growth of EVs and steel production and liquidation of excess inventories by customers, built over the course of 2022-23.</li><li><p>Sticky costs remain as pricing power wanes. Over the course of 2022-23, many companies experiencing a rapid rise in raw material costs, driven by higher petrochemical prices and rising costs of transportation and logistics aggressively raised prices in an attempt to preserve profits, if not profit margins. </p></li></ul>

Heavy lithium. Halfway through the year, the S&amp;P 500 has appreciated 15.4% YTD, driven by the strong performance of the Magnificent Seven, even as the remaining 490+ companies saw their stock prices move more in line with the Russell 2000, which itself posted an 7.8% gain YTD.Over the same timeframe, the WTR-CMI Index delivered a disappointing 4.4% gain under the weight of lithium and graphite companies losing 36-62% of their value due to collapsing lithium and synthetic graphite prices, driven by slower growth of EVs and steel production and liquidation of excess inventories by customers, built over the course of 2022-23.Sticky costs remain as pricing power wanes. Over the course of 2022-23, many companies experiencing a rapid rise in raw material costs, driven by higher petrochemical prices and rising costs of transportation and logistics aggressively raised prices in an attempt to preserve profits, if not profit margins. 

Mat-Chem Notes - Between a Rock and a Hard Place - 2H24 Outlook