Ahead of our 33rd Annual Basic Materials Conference, we want to convey some key themes for each company presenting from our coverage universe. As always, we welcome prelim debates:

Searching for Further Direction – Slope of the “Remaining Recovery” Still Material: One of the most common (albeit broad) topics we continue to have with investors is the 2H / ’21 outlook “slope” for various industries, following the “V” shape seen in May to July. It’s clear that several end markets are beginning to plateau below prior year levels (pre-COVID), rendering the question – what is the new normal and what does it mean for ’21 outlooks? This topic spans several end-markets, including (but not limited to) auto, refinish, industrial, aero, ethanol (gauge of forward ag sentiment), and catalyst demand. Company messaging is likely to remain cautiously optimistic, rendering our sense of a full recovery a 1H21 story, w/ certain end-markets such as aero lagging. There is a strong investor focus on customer inventory levels (intermediates, refinish, etc.), attempting to position ahead of potential re-stock activity post normalization. We prefer a balance of stability with end-market / regional optionality, prevalent in ASH, FMC, APD and SHW. Overall, we expect co’s which are still delivering consistent results to be disproportionately rewarded in valuation terms vs. peers.

Prefer Ferts for Value Trade and Potential Upside to ‘21 #s: We prefer the ferts vs. commodity chems (the latter now a consensus trade) given our beliefs: (i.) recent success of PE price increases will be muddled in 4Q by supply ramping (post US storms + USGC maintenance shut-downs) and higher ethane prices, (ii.) the PU momentum trade is already in full force post Covestro / HUN despite lingering questions re: ’21 S/D dynamics (trough recovery benefit is old news), (iii.) N&P price rallies are supported by cost curve dynamics and should support ’21 outlooks, (iv.) ag fundamentals ex-US / EU are supportive of stable demand trends (Brazil, Central / SE Asia), and (v.) there is a high degree of skepticism re: the sustainability of fert price rallies (CSe prices to consolidate at slightly lower highs). Bottom line, we see a higher probability for “Blue Sky” upside scenarios for CF and MOS.