Cyclicality in the Materials sector leads to significant volatility in share prices, as many of the underlying business models are strongly correlated with commodity markets and broader economic trends. On the flip side, the same correlation provides diversification and hedging benefits to investors and also yields superior profitability for companies during inflationary periods.
It is also worth noting that certain segments within the broader Materials classification are poised to benefit more from ongoing global transitions across sectors such as energy and technology. For instance, energy transition trends such as electric vehicles and solar will lead to an uptick in demand for commodities such as lithium, copper, cobalt, nickel, etc. Similarly, AI-related developments will generate additional demand for silicon, palladium, gallium, germanium, and rare earth materials.
However, there are other segments that have struggled with industry-specific and macroeconomic challenges. On December 19, McKinsey & Company published a report, “Chemicals 2025: A new reality for the global chemical industry.” It highlighted how the chemical industry, which used to be an outperformer, had been delivering lagging returns relative to the broader market in recent times. This calls for businesses to rework their cost structures, capacity utilization, product portfolios, and innovation spend.
Agriculture is another sector with immense potential for investors, but it also exposes them to macroeconomic and policy risks. On January 16, advisory firm Pinion Global shared its 2026 Outlook, highlighting uncertainties linked with tariffs, rising input costs, and trade deals to shape the agricultural landscape.
Despite the above-mentioned hurdles, many underlying businesses within the broader Materials universe will keep garnering investor interest and will offer lucrative opportunities from time to time.
With that background, let’s explore our 10 Best Materials Stocks to Invest in According to Hedge Funds.
Copyright: lightkeeper / 123RF Stock Photo
Our Methodology
To identify relevant stocks for this article, we began by screening U.S.-listed companies within the Materials sector having market capitalizations above $2 billion. We then added a filter to include only companies with share prices above $5 to avoid penny stocks. Also, we shortlisted only stocks with at least 5% upside potential according to TipRanks consensus as of January 19.
In the final part of the screening, we identified the number of hedge funds that held positions in these stocks as of the end of the third quarter of 2025, using Insider Monkey’s hedge fund database. Finally, we selected 10 stocks with the highest number of hedge funds holding stakes and ranked them in ascending order.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
10. Celanese Corporation (NYSE:CE)
Potential Upside: 25.1%
Number of Hedge Fund Holders: 45
Celanese Corporation (NYSE:CE) is one of the best Materials stocks to invest in according to Hedge Funds.
On January 16, Arun Viswanathan of RBC Capital reaffirmed his favorable view on Celanese Corporation (NYSE:CE), maintaining a Sector Perform rating on the stock. He also adjusted his target price estimate from $43 to $48, which results in an upside of 8.5%.
Viswanathan’s rating is based on his broader analysis of the Commodity Chemicals space. The analyst noted that Celanese Corporation (NYSE:CE) registered a lower level of production utilization for its TiO2 segment during the fourth quarter. This resulted in a $25 million incremental charge for the business. Despite such challenges, Viswanathan raised his price target based on the commercialization of immersion cooling expected during 2026.
On January 15, Citi analyst Patrick Cunningham also reiterated his bullish stance on Celanese Corporation (NYSE:CE). He assigned a Buy rating and revised his price target from $56 to $63, which now yields an upside of more than 42%.
Cunningham’s views stem from Citi’s revisions for the Commodity Chemicals segment following the Q4 earnings preview. The firm also projected solid margins in 2026, driven by depressed ethane costs and production discipline.
Celanese Corporation (NYSE:CE) is a global specialty materials and chemicals leader that is involved in the production and sale of polymers across the globe. The company operates through its two segments, i.e., Engineered Materials and Acetyl Chain. It sells products under various brands, including FRIANYL, Celcon, Crastin, Rynite, Vectra, and Laprene.
9. Axalta Coating Systems (NYSE:AXTA)
Potential Upside: 9.9%
Number of Hedge Fund Holders: 46
Axalta Coating Systems (NYSE:AXTA) is one of the best Materials stocks to invest in according to Hedge Funds.
On January 7, RBC Capital analyst Arun Viswanathan revised his price target for Axalta Coating Systems (NYSE:AXTA) from $30 to $33, and maintained a Sector Perform rating on the stock.
Viswanathan’s upward revision in price target comes on the back of S&P’s latest projections for global auto production. The analyst noted a slight sectoral recovery and accordingly has kept his EBITDA estimates for Axalta Coating Systems (NYSE:AXTA) intact. He has forecast $284 million in EBITDA for Q4, resulting in a total 2025 EBITDA of $1.14 billion. For 2026, the analyst expects this figure to grow to $1.18 billion and has also raised his forward EV/EBITDA valuation multiple from 8.5x to 9x.
On January 7, Kevin McCarthy from Vertical Research downgraded his rating on Axalta Coating Systems (NYSE:AXTA) from Buy to Hold. However, the analyst estimated a price target of $37, which still offers a double-digit upside potential of above 11%.
Axalta Coating Systems (NYSE:AXTA) develops, markets, and sells high-performance coating systems for construction, industrial, mobility, and energy applications. The business is segregated into two segments, i.e., performance coatings and mobility coatings. It also offers products for repairing damaged vehicles, OEMs, and body shop dealerships.
8. Mosaic Company (NYSE:MOS)
Potential Upside: 16.2%
Number of Hedge Fund Holders: 47
Mosaic Company (NYSE:MOS) is one of the best Materials stocks to invest in according to Hedge Funds.
As of the December 20 closing, Mosaic Company (NYSE:MOS) has a moderately bullish sentiment according to consensus. The stock offers over 16% upside potential to investors based on a $31.42 median 1-year price target. It has received coverage from 13 analysts, 5 of whom have assigned Buy ratings and 8 have given Hold calls.
On January 8, Bank of America Securities analyst Matthew DeYoe maintained his optimistic outlook on Mosaic Company (NYSE:MOS). The analyst maintained his Buy rating on the stock and lowered his price target estimates from $39 to $33. Despite this downward revision, he sees more than 22% upside potential from the prevailing level.
DeYoe’s rating is part of Bank of America Securities’ revisions on the broader Chemicals sector. He highlighted concerns regarding the growing oversupply of commodities and an inconsistent backdrop for specialties. Despite these issues, the analyst noted certain catalysts that could provide support, such as the Fed’s dovish stance, encouraging PMI indicators, and capacity rationalization in China.
Mosaic Company (NYSE:MOS) is involved in mining and production of potash crop nutrients and concentrated phosphate. Through its manufacturing facilities, the company produces di-ammonium phosphate (DAP), MicroEssentials ammoniated phosphate, and mono-ammonium phosphate products. It also supplies animal feed ingredients and focuses on “mine-to-market” delivery of products to raise crop yields.
7. International Flavors & Fragrances (NYSE:IFF)
Potential Upside: 15.4%
Number of Hedge Fund Holders: 50
International Flavors & Fragrances (NYSE:IFF) is one of the best Materials stocks to invest in according to Hedge Funds.
Lauren Lieberman from Barclays reaffirmed her bullish view on International Flavors & Fragrances (NYSE:IFF). She assigned a Buy rating on January 16 and also raised her target price estimate from $75 to $78. At the prevailing level, it now leads to a double-digit upside potential of over 10%.
Lieberman attributed recent interest in International Flavors & Fragrances (NYSE:IFF) to a “flight to safety,” as the broader sector is still facing structural challenges. Going forward, she sees potential risks related to currency and oil markets that could adversely affect the sector.
Back on January 8, Bank of America Securities analyst Salvator Tiano maintained his Buy rating for International Flavors & Fragrances (NYSE:IFF). Based on potential rate cuts and favorable PMI indicators, he also revised the price target from $84 to $88. This results in an upside of over 24% for investors.
International Flavors & Fragrances (NYSE:IFF) is a manufacturer and supplier of ingredients for food, beverages, pharma, beauty, and other similar products. The business has 4 unique segments, i.e., Health & Biosciences, Scent, Nourish, and Pharma Solutions. It operates on a B2B model involving other consumer goods players, and extends a lot of resources towards R&D, innovation, and supply chain efficiencies.
6. Air Products and Chemicals (NYSE:APD)
Potential Upside: 9.6%
Number of Hedge Fund Holders: 51
Air Products and Chemicals (NYSE:APD) is one of the best Materials stocks to invest in according to Hedge Funds.
On January 21, Citi analyst Patrick Cunningham reaffirmed his Neutral rating on Air Products and Chemicals (NYSE:APD), and revised his target price forecast from $245 to $272. Such a notable revision is backed by his favorable view of currency and sales environment for the specialty chemicals sector.
Back on January 8, Steve Byrne from Bank of America Securities upgraded his rating for Air Products and Chemicals (NYSE:APD) from Underperform to Neutral. The analyst forecasted a price target of $275, yielding a 6.5% upside potential.
Byrne’s upgrade is based on his belief that the underlying market conditions do not seem as vulnerable as the volatility of Air Products and Chemicals (NYSE:APD) shares projects. He acknowledged management’s efforts to tackle challenges related to backlog projects. However, he noted that the success of the company’s turnaround strategy will be dependent on traditional gas projects instead of underperforming legacy ones.
Air Products and Chemicals (NYSE:APD) is a global leader in process & specialty, atmospheric and industrial gases. They cater to the needs of diverse industries such as electronics, metals, chemicals, energy, and more. They produce gases including oxygen, hydrogen, nitrogen, argon, carbon dioxide, helium, carbon monoxide, and syngas.
5. DuPont de Nemours (NYSE:DD)
Potential Upside: 14.6%
Number of Hedge Fund Holders: 52
DuPont de Nemours (NYSE:DD) is one of the best Materials stocks to invest in according to Hedge Funds.
On January 21, Arun Viswanathan from RBC Capital maintained his favorable outlook on DuPont de Nemours (NYSE:DD). He assigned an Outperform rating to the stock and also increased his price target from $48 to $51. The analyst holds an optimistic view of company-specific factors going into 2026, and also expects in-line prints for the upcoming Q4 announcement. As per Viswanathan’s forecasts, the stock currently offers an upside of almost 21%.
Earlier on January 16, JPMorgan analyst Stephen Tusa also reaffirmed his Overweight stance on DuPont de Nemours (NYSE:DD). The analyst revised his price target from $48 to $50, implying an upside of over 18%.
Tusa’s rating is part of JPMorgan’s revisions across electrical equipment and multi-industry spaces, based on the preview of upcoming Q4 results. The firm remains bullish on “growth-related names into and out of the quarter.”
DuPont de Nemours (NYSE:DD) is a technology-based specialty materials provider that delivers fabrication solutions for semiconductors and integrated circuits. The business is segmented towards industrial, water, electronics, and protection markets. It also offers advanced packaging materials, dielectric & metallization solutions, silicones, fabrication chemistries, and electrolytic metallization solutions.
4. Corteva Inc (NYSE:CTVA)
Potential Upside: 15.0%
Number of Hedge Fund Holders: 57
Corteva Inc (NYSE:CTVA) is one of the best Materials stocks to invest in according to Hedge Funds.
On January 21, Jeffrey Zekauskas of JPMorgan maintained an Overweight rating on Corteva Inc (NYSE:CTVA). The analyst also raised the price target from $70 to $75, which results in an upside of almost 9%.
Zekauskas has attributed his upward revision to expectations of higher U.S. corn volumes in 2026. He shared a quantified impact of such growth by mentioning that a 100 basis points of global corn volume translates into almost $70 million in revenues for Corteva Inc (NYSE:CTVA), and 1 million acres of corn volume leads to around $100 million in sales for the company.
Back on January 16, Edlain Rodriguez from Mizuho Securities also raised his price target for Corteva Inc (NYSE:CTVA), from $78 to $80, and assigned an outperform rating to the stock.
Rodriguez revised his estimates following Mizuho Securities’ adjustments to the agricultural group, based on the Q4 results preview. He expects corn prices to remain subdued during 2026, which will dampen earnings for fertilizer companies. Despite such skepticism, his revised target results in an upside of over 16% from the current level.
Corteva Inc (NYSE:CTVA) is a pure-play agriculture business that delivers seed, crop protection, and digital agriculture solutions to farmers. The company aims to elevate crop yields through innovation with a focus on herbicides, insecticides, fungicides, and biologicals. It also offers solutions to offer resistance to insects, disease, and weather.
3. Ecolab Inc (NYSE:ECL)
Potential Upside: 8.2%
Number of Hedge Fund Holders: 59
Ecolab Inc (NYSE:ECL) is one of the best Materials stocks to invest in according to Hedge Funds.
On January 8, Bank of America Securities analyst Matthew DeYoe reaffirmed his positive outlook on Ecolab Inc (NYSE:ECL). The analyst assigned a Buy rating to the stock and raised his price target from $312 to $314. DeYoe’s forecasts lead to an upside of above 15% for investors.
Despite expressing concerns regarding oversupply of commodities along with mixed sentiment towards agriculture, DeYoe sees some macroeconomic support during 2026. This includes the possibility of further rate curbs by the Fed and a positive shift in PMI figures. Another factor highlighted to have a favorable impact is the forecasted capacity rationalization in China.
On January 7, UBS analyst Joshua Spector also maintained his Neutral rating on Ecolab Inc (NYSE:ECL). In the process, he raised his price target estimate from $291 to $295, yielding an upside of more than 8% at the prevailing level.
Ecolab Inc (NYSE:ECL) delivers sustainable solutions for water, hygiene, and infection prevention. The company has 4 reporting segments, i.e., Global Industrial, Global Institutional & Specialty, Global Healthcare & Life Sciences, and Global Pest Elimination. As of 2025, it also delivers 3D TRASAR technology for real-time monitoring of water process management.
2. Sherwin-Williams Company (NYSE:SHW)
Potential Upside: 13.6%
Number of Hedge Fund Holders: 63
Sherwin-Williams Company (NYSE:SHW) is one of the best Materials stocks to invest in according to Hedge Funds.
On January 19, Citi analyst Patrick Cunningham maintained a Buy rating for Sherwin-Williams Company (NYSE:SHW). Moreover, the analyst raised his price target from $390 to $410, resulting in a revised upside potential of more than 18%. Cunningham sees an elevated housing forecast through 2027, which inspires confidence in the stock.
Back on January 7, RBC Capital analyst Arun Viswanathan also maintained his Outperform rating for Sherwin-Williams Company (NYSE:SHW). He lowered his target price estimates from $405 to $395, resulting in an upside potential of around 14%.
Despite weaker consumer sentiment and lackluster construction, Viswanathan anticipates the fourth-quarter results for Sherwin-Williams Company (NYSE:SHW) to be in line with management guidance. He noted some fundamental factors that will continue to support the ongoing share gains. These include the company’s $80 million annual savings in restructuring costs, as well as effective execution of price hikes.
Sherwin-Williams Company (NYSE:SHW) develops and distributes paints, coatings, and similar products covering a range of industrial, commercial, and retail segments. Its extensive distribution network comprises self-owned stores, dealers, and online platforms. The company has a well-diversified brand portfolio backed by bulk manufacturing and an R&D focus.
1. Linde plc (NASDAQ:LIN)
Potential Upside: 15.2%
Number of Hedge Fund Holders: 76
Linde plc (NASDAQ:LIN) is one of the best Materials stocks to invest in according to Hedge Funds.
On January 20, Citi analyst Patrick Cunningham maintained his bullish views on Linde plc (NASDAQ:LIN). The analyst assigned a Buy rating and also raised his price target from $520 to $540, yielding an upside of almost 25% at the prevailing level.
On December 17, BMO Capital also reaffirmed its Outperform rating on Linde plc (NASDAQ:LIN), based on the company’s encouraging growth prospects. The firm assigned a $501 target price, which results in almost 16% upside potential for investors.
The firm reflected on management’s recent business review, highlighting the company’s potential to generate EPS growth above 10% range through multiple avenues. Management also delivered an artificial intelligence presentation, which, according to BMO Capital, would generate operational efficiencies and cost savings for the business. The firm also noted management’s view that the stock is underpriced following a three-month sell-off, offering attractive entry points for investors.
Linde plc (NASDAQ:LIN) is a global player in industrial gases and engineering solutions. It supplies atmospheric and process gases, including hydrogen, oxygen, nitrogen, carbon dioxide, helium, and argon. It also operates a healthcare subsidiary to offer medical gases for respiratory care. Other offerings include surface coatings, metal powders, and carbon capture.
While we acknowledge the potential of LIN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than LIN and that has 100x upside potential, check out our report about the cheapest AI stock.
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