In this article, we discuss 12 best specialty chemical stocks to buy now. If you want to skip our detailed discussion on the specialty chemicals industry, head directly to 5 Best Specialty Chemical Stocks To Buy Now.
In 2022, the global market for specialty chemicals was dominated by five segments, which accounted for nearly 38% of the total market share. These segments included specialty polymers, electronic chemicals, industrial and institutional cleaners, water-soluble polymers, and construction chemicals, as reported by S&P Global. Mainland China emerged as the largest consumer of a range of specialty chemicals, such as antioxidants, catalysts for petroleum refining and chemical processes, emission control agents, construction chemicals, feed additives, and flame retardants. North America led in the consumption of biocides, corrosion inhibitors, cosmetic and personal care chemicals, food additives, industrial and institutional cleaners, among others. Western Europe topped the charts in nutraceutical consumption, while other Asia regions had the highest consumption of chemicals used in semiconductor fabrication.
In the past, specialty chemical firms based their sales on the value of their products. These products constituted a relatively small portion of their customers’ overall cost structures. However, advancements in supply-chain management, strategic sourcing, and e-commerce have brought about greater transparency and customer awareness. Consequently, in certain areas, the specialty chemicals sector is beginning to resemble a commodity market, with some companies competing on price rather than product performance. To improve their margins in the face of rising costs in research and development, energy, and raw materials, some specialty chemical companies are implementing price hikes. Additionally, they are shifting their focus from solely providing products to offering support services and catering to specific customer needs aiming to establish barriers to entry in their respective markets.
The specialty chemicals and materials sector witnessed some of the largest chemical deals in 2022, according to Deloitte. Koninklijke DSM N.V.’s strategic portfolio adjustments played a significant role in driving several major transactions in this sector, amounting to approximately $26 billion. These included the divestiture of its Engineering Materials and Protective Materials businesses, followed by the merger of its remaining operations with Fermenich, a fragrance and taste business, with the latter deal valued at $20.6 billion. Despite the challenges posed by rising borrowing costs, private equity firms continued to make contributions to the chemicals sector. This was evident in American Securities’ acquisition of Meridian Adhesives Group and Advent International’s partnership with LANXESS to acquire DSM’s engineering materials business for €3.7 billion. Given the ongoing challenges and the need for innovative deal structures, private equity is expected to maintain a significant presence in this sector. According to a Deloitte survey, 90% of executives in the specialty chemicals and materials sector indicated that they were either very likely or somewhat likely to pursue acquisitions in 2023, with 69% expressing a high likelihood of doing so. As a result, chemical companies in this sector are anticipated to remain active in 2023 as they continue to explore growth opportunities through mergers and acquisitions.
As per KPMG‘s findings, businesses worldwide, particularly those in sectors such as chemicals that heavily depend on foreign energy and raw materials, will need to increase their investments in improving productivity, innovating technological solutions, and fortifying their supply chains. These efforts are necessary for safeguarding profit margins in the face of increasing challenges, including inflation, the trend toward reduced globalization, and a heightened geopolitical landscape. Such endeavors will require both financial resources and creative thinking.
Mark Newman, CEO of The Chemours Company (NYSE:CC), joined Brian Sullivan and the ‘CNBC Special: Taking Stock’ to discuss his company’s efforts to expand the footprint of American manufacturing. Discussing the economic uncertainties, he said:
“There is a lot of economic uncertainty but interestingly there is also simultaneously quite a bit of growth – secular growth – in the new economy, from semicon to electric vehicles, as well as our work in hydrogen. So, there is significant secular growth in a number of key areas despite the global uncertainty in the macroeconomy.”
In this article, we discuss some of the top specialty chemical companies, which include Albemarle Corporation (NYSE:ALB), Ecolab Inc. (NYSE:ECL), and Linde plc (NYSE:LIN).
Our Methodology
We selected the following specialty chemical stocks based on the hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 910 elite hedge funds tracked as of the end of the second quarter of 2023. The list is arranged in ascending order of the number of hedge fund investors in each firm.
Pixabay/Public Domain
Best Specialty Chemical Stocks To Buy Now
12. Tronox Holdings plc (NYSE:TROX)
Number of Hedge Fund Holders: 21
Tronox Holdings plc (NYSE:TROX) is a fully integrated producer of titanium dioxide pigment, with operations spanning North America, South and Central America, Europe, the Middle East, Africa, and the Asia Pacific. The company manages titanium-bearing mineral sand mines, as well as beneficiation and smelting processes. Its product portfolio includes TiO2 pigment, ultrafine specialty TiO2, pig iron, zircon, feedstock, monazite, and titanium tetrachloride, among other products. On August 2, Tronox Holdings plc (NYSE:TROX) declared a $0.125 per share quarterly dividend, in-line with previous. The dividend was paid on September 15.
According to Insider Monkey’s second quarter database, 21 hedge funds were bullish on Tronox Holdings plc (NYSE:TROX), compared to the previous quarter when 24 funds had invested in the stock. Jonathan Barrett and Paul Segal’s Luminus Management is the largest position holder in the company, with 2.8 million shares valued at $35.5 million.
In addition to Albemarle Corporation (NYSE:ALB), Ecolab Inc. (NYSE:ECL), and Linde plc (NYSE:LIN), Tronox Holdings plc (NYSE:TROX) is one of the best specialty chemical stocks to buy.
11. Westlake Corporation (NYSE:WLK)
Number of Hedge Fund Holders: 23
Westlake Corporation (NYSE:WLK) is one of the best chemical stocks to buy. It is a global manufacturer and distributor of performance and essential materials, along with housing and infrastructure products. Westlake Corporation (NYSE:WLK)’s customer base includes chemical processors, plastics fabricators, small construction contractors, municipalities, and supply warehouses, catering to different consumer and industrial sectors. The company was previously referred to as Westlake Chemical Corporation.
On August 14, Westlake Corporation (NYSE:WLK) declared a $0.50 per share quarterly dividend, an increase of 40.1% from the previous dividend of $0.36. The dividend was paid on September 12.
According to Insider Monkey’s second quarter database, 23 hedge funds were bullish on Westlake Corporation (NYSE:WLK), in contrast to the preceding quarter when 28 funds had invested in the stock. William B. Gray’s Orbis Investment Management held the largest position in the company, with 2.9 million shares worth $348.26 million.
10. Celanese Corporation (NYSE:CE)
Number of Hedge Fund Holders: 30
Celanese Corporation (NYSE:CE), a company dealing with chemicals and specialty materials, produces and markets high-performance engineered polymers in the United States and globally. The company is organized into two segments – Engineered Materials and Acetyl Chain. Celanese Corporation (NYSE:CE), ranked 10th on our list of the best specialty chemical stocks, also manufactures ultra-high molecular weight polyethylene. Established in 1918, Celanese Corporation (NYSE:CE) is headquartered in Irving, Texas.
On September 6, analysts at KeyBanc Capital Markets upgraded Celanese Corporation (NYSE:CE) from a Sector Weight rating to an Overweight rating, setting a price target of $149.
According to Insider Monkey’s second quarter database, 30 hedge funds were bullish on Celanese Corporation (NYSE:CE), compared to 32 funds in the previous quarter. Warren Buffett’s Berkshire Hathaway is the largest stakeholder of the company, with a position comprising 5.36 million shares worth $620.52 million.
Oakmark Fund made the following comment about Celanese Corporation (NYSE:CE) in its second quarter 2023 investor letter:
“Celanese Corporation (NYSE:CE) is the world’s largest and lowest cost producer of acetic acid and a leading producer of engineered polymers used in applications ranging from auto parts to medical devices. Although the company operates in highly cyclical markets, its unmatched cost position allows it to remain profitable even during severe industry downturns. Recently, the market reacted negatively to Celanese’s acquisition of Dupont’s Mobility & Materials segment because the deal added financial leverage to the balance sheet during a cyclical downturn. Despite challenging industry conditions today, we believe the company will generate significant cash flow to reduce its debt burden rapidly. We also believe the integration of the acquired business will yield cost synergies and strengthen Celanese’s engineered materials franchise over the long term. The stock price dislocation presented an opportunity to purchase Celanese shares at a single-digit multiple of our estimate of normalized earnings power.”
9. Eastman Chemical Company (NYSE:EMN)
Number of Hedge Fund Holders: 33
Next on our list of the best chemical stocks is Eastman Chemical Company (NYSE:EMN), a specialty materials company with operations in the United States and worldwide. The company’s operations are divided into four segments – Additives & Functional Products, Advanced Materials, Chemical Intermediates, and Fibers. Eastman Chemical Company (NYSE:EMN) was established in 1920 and has its headquarters in Kingsport, Tennessee.
On September 28, Eastman Chemical Company (NYSE:EMN) revealed that it had agreed to sell its Texas City operations to INEOS Acetyls for $490 million. Eastman will receive $415 million in cash, with the remaining amount scheduled for payment on the first and second anniversaries following the closing.
According to Insider Monkey’s second quarter database, 33 hedge funds were bullish on Eastman Chemical Company (NYSE:EMN), an increase from 28 funds in the prior quarter. Israel Englander’s Millennium Management held the largest position in the company, with 2.63 million shares valued at $220.24 million.
ClearBridge Value Equity Strategy made the following comment about Eastman Chemical Company (NYSE:EMN) in its Q2 2023 investor letter:
“We also added a new position in Eastman Chemical Company (NYSE:EMN), a vertically integrated chemical company, reflecting an opportunity to buy an overly depressed cyclical stock with an extremely cheap option on molecular recycling. An eventual cyclical rebound alone is enough to justify a much higher business value as demand will accelerate as destocking ends, allowing Eastman to realize material profit margin expansion as it gets ahead of cost input inflation. Additionally, Eastman is ramping up three molecular recycling plants over the next few years based on its Polyester Renewal Technology, a less energy intensive and lower cost production process. This should drive faster growth while generating compelling returns on capital.”
8. Orion S.A. (NYSE:OEC)
Number of Hedge Fund Holders: 35
Orion S.A. (NYSE:OEC) is involved in the production and distribution of carbon black products. The company operates through two segments – Specialty Carbon Black and Rubber Carbon Black. Previously known as Orion Engineered Carbons S.A., the company officially adopted the name Orion S.A. (NYSE:OEC) in June 2023. Orion S.A. (NYSE:OEC) was founded in 1862 and is headquartered in Houston, Texas.
On September 21, Orion S.A. (NYSE:OEC) declared a $0.0207 per share quarterly dividend, in-line with previous. The dividend is to be paid on January 17, 2024 to shareholders of record as of December 15, 2023.
According to Insider Monkey’s second quarter database, 35 hedge funds were bullish on Orion S.A. (NYSE:OEC), compared to the previous quarter when 34 funds had invested in the stock. Richard S. Pzena’s Pzena Investment Management held the largest position in the company, with over 3.1 million shares worth $66.06 million.
Choice Equities Capital Management made the following comment about Orion Engineered Carbons S.A. (NYSE:OEC) in its Q4 2022 investor letter:
“Our holdings are generally performing as anticipated. As a general statement, despite the potential economic headwinds, we continue to expect growing cash flows, and in nearly all cases operating margin expansion, into next year and beyond.
Industrials – Orion Engineered Carbons S.A. (NYSE:OEC) and Wesco International Inc. (WCC) continue to execute as expected. Both market leading companies trade at single digit earnings multiples and offer strong growth prospects.”
7. LyondellBasell Industries N.V. (NYSE:LYB)
Number of Hedge Fund Holders: 36
LyondellBasell Industries N.V. (NYSE:LYB), ranking 7th on our list of the best chemical stocks, is a global chemical company with operations in the United States, Germany, Mexico, Italy, Poland, France, Japan, China, and the Netherlands. The company’s operations are organized into six segments – Olefins and Polyolefins Americas; Olefins and Polyolefins Europe, Asia, International; Intermediates and Derivatives; Advanced Polymer Solutions; Refining; and Technology. LyondellBasell Industries N.V. (NYSE:LYB) was established in 2009 and has its headquarters in Houston, Texas.
On August 18, LyondellBasell Industries N.V. (NYSE:LYB) declared a $1.25 per share quarterly dividend, in-line with previous.The dividend was paid on September 5.
According to Insider Monkey’s second quarter database, 36 hedge funds were bullish on LyondellBasell Industries N.V. (NYSE:LYB), compared to 35 funds in the preceding quarter. Israel Englander’s Millennium Management is the largest stakeholder of the company, with 1.22 million shares worth $112 million.
Here is what Miller Howard Investments has to say about LyondellBasell Industries N.V. (NYSE:LYB) in its Q3 2021 investor letter:
“We initiated a position in LyondellBasell (LYB). Chemical markets are currently robust given the combination of 2020 plant shutdowns and strongly recovering demand. Despite the tailwinds, Lyondell trades at a low valuation and yields just under 5%.”
6. Dow Inc. (NYSE:DOW)
Number of Hedge Fund Holders: 37
Dow Inc. (NYSE:DOW) offers a range of materials science solutions for different applications, including packaging, infrastructure, mobility, and consumer products. Their operations span across the United States, Canada, Europe, the Middle East, Africa, India, the Asia Pacific, and Latin America. Dow Inc. (NYSE:DOW) operates through three segments – Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials & Coatings. The company was established in 2018 and has its headquarters in Midland, Michigan.
On August 9, Dow Inc. (NYSE:DOW) declared a $0.70 per share quarterly dividend, in-line with previous. The dividend was paid on September 8 to shareholders of record as of August 31.
According to Insider Monkey’s second quarter database, 37 hedge funds were bullish on Dow Inc. (NYSE:DOW). Comparatively, 45 funds had invested in the stock in the last quarter. Richard S. Pzena’s Pzena Investment Management held the largest position in the company, with 14.9 million shares valued at $792.72 million.
Like Albemarle Corporation (NYSE:ALB), Ecolab Inc. (NYSE:ECL), and Linde plc (NYSE:LIN), Dow Inc. (NYSE:DOW) is one of the best chemical stocks to buy.
Click to continue reading and see 5 Best Specialty Chemical Stocks To Buy Now.
Suggested articles:
Disclosure: None. 12 Best Specialty Chemical Stocks To Buy Now is originally published on Insider Monkey.
