For his final "Executive Decision" segment of Mad Money Tuesday night, Jim Cramer spoke with Michael McGarry, chairman and CEO of PPG Industries (PPG) , the industrial coatings manufacturer that's going strong despite trade fears.
McGarry started off by saying that auto manufacturing is picking up in China, which is always great news for PPG. The company is also hot on the acquisition trail, completing five deals over the past 12 months.
McGarry said that PPG believes that growing the business is better than buying back the stock, but if they can't find anything to buy, they will certainly do both. He said PPG also remains committed to returning capital to shareholders in the form of dividends.
When asked about organic growth, McGarry said they're very excited about the shifts in packaging away from plastics and toward materials like aluminum. They're also looking forward to more electric vehicles, because EVs require two to four times as many coatings and adhesives as traditional vehicles. McGarry noted that PPG is actively developing new materials for EVs, such as binders, gap fillers, and thermal coatings.
Let's check out PPG's charts and technical indicators. In this daily bar chart of PPG, below, we can see that prices have made a nice mark-up the past 12 months. PPG is trading above the rising 50-day simple moving average line as well as above the rising 200-day moving average line.
The volume histogram is uneven, however the On-Balance-Volume (OBV) line shows a steady rise the past year to confirm and support the price advance.
The Moving Average Convergence Divergence (MACD) oscillator has been above the zero line for much of the year and is currently in a take profits sell mode.
In this weekly bar chart of PPG, below, we can see that PPG largely traded sideways from 2017 into the middle of 2019. PPG is now above the rising 40-week moving average line.
The weekly OBV line shows a rise from the middle of 2018 to now which tells us that buyers of PPG have been more aggressive for many months which is very bullish.
The MACD oscillator on this longer time frame is bullish.
In this Point and Figure chart of PPG, below, we look at just the price action and ignore the volume and time and small jiggles in trading. Here we can see the upside breakout at $121.25 and the $166 potential price objective.
Bottom line strategy: Industrial coatings may not sound exciting but the charts of PPG are strong and headed higher. Trade PPG from the long side nearer to $125 risking below $123. $166 is our potential price target in the first quarter of 2020.
