In this article, we discuss 14 best chemical stocks to buy now.
According to Deloitte, the chemical industry is set to undergo a huge transformation towards sustainability, and the progress that was made in 2022 will continue in the next year. The chemical industry is facing a new industrial policy in the United States, changing consumer preferences, supply chain constraints, and heat from economic uncertainty. The US chemical industry has made a robust rebound since the start of 2021, with demand growing in the primary end markets, including construction, healthcare, and safety applications. This was supported in part by a recovery in the US GDP.
However, the U.S. chemical manufacturing industry, which is one of the biggest users of freight rail, is expecting billions of dollars in economic losses if a labor deal is not cut between rail operators and unions, resulting in a possible strike in December. A new economic analysis by the American Chemistry Council expects that a railway strike would affect nearly $2.8 billion in chemical cargo that is transported on a per week basis, and a strike lasting a whole month will lead to a $160 billion loss for the economy, equivalent to one percentage point of GDP. Chris Jahn, president of the ACC, told CNBC on November 16:
“American consumers and manufacturers are still struggling to deal with inflation and don’t need to be hit with a new crisis.”
The chemical industry is essential to almost every part of the economy, and the American Chemistry Council is urging the Congress to step in, using its authority to impose a deal under the Railway Labor Act, which will relieve the pressure on the sector. A possible rail strike will hit the chemical industry hard, which can lead to attractive valuations and buying opportunities for investors. Some of the best chemical stocks to monitor include Albemarle Corporation (NYSE:ALB), DuPont de Nemours, Inc. (NYSE:DD), and Air Products and Chemicals, Inc. (NYSE:APD).
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Our Methodology
We selected the following chemical stocks based on positive analyst coverage, strong business fundamentals, and future growth prospects. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022.
Best Chemical Stocks To Buy Now
14. Braskem S.A. (NYSE:BAK)
Number of Hedge Fund Holders: 2
Braskem S.A. (NYSE:BAK) is a Brazilian company that produces and sells chemicals, including ethylene, polymer and chemical grade propylene, butadiene, butene-1, benzene, toluene, and xylenes products. The company also produces and commercializes thermoplastic resins, fuels, intermediates, and other specialty chemicals.
On November 10, Braskem S.A. reported its Q3 results, posting GAAP earnings per share of $1.73 and a revenue of $4.83 billion, outperforming Wall Street estimates by $1.70 and $780 million, respectively. The cash position at the end of Q3 2022 stood at $2.2 billion.
Scotiabank analyst Ben Isaacson on November 11 upgraded Braskem S.A. to Outperform from Sector Perform with a price target of R$44. The analyst said the stock’s risk/reward is “tilting to the upside” after the recent selloff. If polymer margins have not bottomed yet, they are close to doing so, the analyst wrote in a research note. He no longer sees downside asymmetrical margin risk.
According to the third quarter database of Insider Monkey, Jim Simons’ Renaissance Technologies and Cliff Asness’ AQR Capital Management held stakes collectively worth $5.75 million in Braskem S.A..
Like Albemarle Corporation, DuPont de Nemours, Inc., and Air Products and Chemicals, Inc., Braskem S.A. is one of the best chemical stocks to invest in.
13. Westlake Chemical Partners LP (NYSE:WLKP)
Number of Hedge Fund Holders: 2
Westlake Chemical Partners LP (NYSE:WLKP) is a Texas-based company that acquires, develops, and operates ethylene production facilities and related assets in the United States. It also sells ethylene co-products, including propylene, crude butadiene, pyrolysis gasoline, and hydrogen. Westlake Chemical Partners LP is one of the best chemical stocks to invest in.
On October 31, Westlake Chemical Partners LP declared a $0.4714 per share quarterly dividend, in line with previous. The dividend is distributable on November 28, to shareholders of record on November 10. Westlake Chemical Partners LP’s dividend yield on November 21 came in at 8.40%.
Deutsche Bank analyst David Begleiter on November 18 maintained a Buy recommendation on Westlake Chemical Partners LP but trimmed the price target on the shares to $29 from $30 following the Q3 results. The analyst believes the company’s “unique business model continues to demonstrate an ability to provide stable value to unitholders over the long term.”
According to Insider Monkey’s Q3 data, Ken Griffin’s Citadel Investment Group and John Zaro’s Bourgeon Capital held stakes worth $770,000 and $140,000 in Westlake Chemical Partners LP, respectively.
12. H.B. Fuller Company (NYSE:FUL)
Number of Hedge Fund Holders: 13
H.B. Fuller Company (NYSE:FUL) is a Minnesota-based company that formulates, manufactures, and markets adhesives, sealants, coatings, polymers, tapes, encapsulants, additives, and other specialty chemical products worldwide. The company operates through three segments – Hygiene, Health and Consumable Adhesives, Engineering Adhesives, and Construction Adhesives.
Baird analyst Ghansham Panjabi said on October 13 that he is confident about H.B. Fuller Company’s margins, which are biased higher given a combination of the counter-cyclicality in its business model, such as free cash flow, a diversified end-market mix, and the execution consistency, all regardless of an uneven macroeconomic backdrop. He maintained an Outperform rating and an $84 price target on H.B. Fuller Company shares.
According to Insider Monkey’s data, 13 hedge funds were bullish on H.B. Fuller Company at the end of Q3 2022, compared to 10 funds in the prior quarter. Claus Moller’s P2 Capital Partners is the leading position holder in the company, with 858,813 shares worth $51.6 million.
11. LSB Industries, Inc. (NYSE:LXU)
Number of Hedge Fund Holders: 23
LSB Industries, Inc. (NYSE:LXU) is headquartered in Oklahoma City, and the company specializes in the manufacture, marketing, and sale of chemical products. The company offers nitrogen-based fertilizers like ammonia, fertilizer grade ammonium nitrate, and urea ammonia nitrate for fertilizer and fertilizer blends. On November 1, LSB Industries, Inc. reported a Q3 non-GAAP EPS of $0.27 and a revenue of $184.27 million, up 44.9% year-over-year.
On November 17, RBC Capital analyst Andrew Wong initiated coverage of LSB Industries, Inc. with an Outperform rating and a $20 price target. The stock provides an attractive combination of improved operations given the new management, positive nitrogen fundamentals, and potential growth catalysts from expansion and low-carbon ammonia opportunities, the analyst told investors. He added that he sees a “favorable asymmetric return profile” with upside potential for LSB Industries, Inc., as he anticipates “strong” free cash flow yield of 34% in 2023 and 17% in 2024.
According to Insider Monkey’s data, 23 hedge funds were long LSB Industries, Inc. at the end of September 2022, up from 14 funds in the prior quarter. Jeffrey Gendell’s Tontine Asset Management is the largest stakeholder of the company, with 1.6 million shares worth $24 million.
10. Origin Materials, Inc. (NASDAQ:ORGN)
Number of Hedge Fund Holders: 23
Origin Materials, Inc. (NASDAQ:ORGN) produces and commercializes plant-based PET plastic, using its platform to turn the carbon found in biomass into useful materials, while also capturing carbon in the process. Origin Materials, Inc. serves tire filler, carbon black, agriculture, and activated carbon markets. It is one of the best chemical stocks to monitor.
On October 14, Credit Suisse analyst John Roberts assumed coverage of Origin Materials, Inc. with an Outperform rating and a $7 price target. The analyst noted that Origin Materials, Inc. represents “more sustainable competition to established chemical businesses.” In addition to having targeted short-term products, its manufacturing platform may be applicable to other products and its R&D program may have technologies useful for other applications, the analyst wrote in a research note.
According to Insider Monkey’s data, 23 hedge funds were long Origin Materials, Inc. at the end of the third quarter of 2022, compared to 20 funds in the prior quarter.
9. Ashland Inc. (NYSE:ASH)
Number of Hedge Fund Holders: 27
Ashland Inc. (NYSE:ASH) is a Delaware-based company that provides additives and specialty ingredients worldwide. It operates through Life Sciences, Personal Care & Household, Specialty Additives, and Intermediates and Solvents segments. On November 18, Ashland Inc. declared a $0.335 per share quarterly dividend, in line with previous. The dividend is payable on December 15, to shareholders of record on December 1.
On November 9, Deutsche Bank analyst David Begleiter raised the price target on Ashland Inc. to $125 from $120 and kept a Buy rating on the shares. The company’s solid results point towards its “improved and resilient business model,” the analyst told investors in a research note.
Among the hedge funds tracked by Insider Monkey, 27 funds were long Ashland Inc. at the end of Q3 2022, compared to 22 funds in the last quarter. Ricky Sandler’s Eminence Capital is the largest position holder in the company, with more than 4 million shares worth close to $388 million.
Here is what Diamond Hill Capital Management specifically said about Ashland Inc. in its Q2 2022 investor letter:
“Other top contributors included Ashland Inc. and Natus Medical. Ashland Global Holdings, manufacturer of specialty chemicals for consumer and industrial markets, is benefiting from strong end-market demand in all segments and a positive mix shift. It has also been proactive in adjusting pricing to recover costs.”
8. Eastman Chemical Company (NYSE:EMN)
Number of Hedge Fund Holders: 32
Eastman Chemical Company (NYSE:EMN) is a Tennessee-based specialty materials company offering its products and services in the United States and internationally. The company operates through Additives & Functional Products, Advanced Materials, Chemical Intermediates, and Fibers segments. Eastman Chemical Company is one of the premier chemical stocks to monitor.
On October 27, Eastman Chemical Company reported a Q3 non-GAAP EPS of $2.05 and a revenue of $2.71 billion, exceeding Wall Street consensus by $0.05 and $140 million, respectively.
Investment advisory Tudor Pickering on November 8 upgraded Eastman Chemical Company to Buy from Hold. Analyst Matthew Blair issued the ratings update.
According to the third quarter database of Insider Monkey, 32 hedge funds were long Eastman Chemical Company, compared to 29 funds in the prior quarter. Israel Englander’s Millennium Management is the largest position holder in the company, with 808,312 shares worth $57.4 million.
7. Huntsman Corporation (NYSE:HUN)
Number of Hedge Fund Holders: 32
Huntsman Corporation (NYSE:HUN) manufactures and sells differentiated organic chemical products worldwide. The company operates through four segments – Polyurethanes, Performance Products, Advanced Materials, and Textile Effects. On November 8, Huntsman Corporation declared a $0.2125 per share quarterly dividend, in line with previous. The dividend is payable on December 30, to shareholders of record on December 15. Huntsman Corporation’s dividend yield on November 21 came in at 3.10%.
On November 8, Deutsche Bank analyst David Begleiter raised the price target on Huntsman Corporation to $31 from $29 and kept a Buy rating on the shares following the Q3 results.
According to Insider Monkey’s data, 32 hedge funds were bullish on Huntsman Corporation at the end of September 2022, compared to 34 funds in the prior quarter. Jeffrey Smith’s Starboard Value LP is the biggest stakeholder of the company, with 5.12 million shares worth nearly $126 million.
Here is what Madison Small Cap Fund has to say about Huntsman Corporation in its Q4 2020 investor letter:
“We have increased our exposure modestly to several industrial and materials names that we believe should benefit from the reopening of the economy in 2021. One such name is Huntsman Corporation (HUN); a company we have followed for more than 15 years and have never owned before. Huntsman Corporation is a global producer of organic chemicals. The company was founded by well-known businessperson and political figure, Jon Huntsman, in 1970 and has grown through its history into a diversified portfolio of chemical businesses Our interest in Huntsman coincides with the current trough conditions in the global economy due to the Covid-19 recession. The company’s end markets are cyclical and demand for their products is highly price elastic. Additionally, the advanced materials business suffered due to the exposure to the aerospace original equipment manufacturer (OEM) down cycle. Despite these challenges, we believe management has executed well; no surprise, given their track record. We think Earnings before interest, taxes, and amortization (EBITDA) troughed in the second quarter and are heartened by the lack of further deterioration in 3Q and 4Q. Looking to the future, we see an intriguing reflation opportunity driven by the resumption of economic activity in late 2021. Further, we posit that the easy monetary policy, that has characterized this cycle, has inflationary side effects which would benefit a basic materials producer such as HUN. The company has also been moving downstream to more value-added businesses, which may drive EBITDA multiple expansion in the future.”
6. Sociedad Química y Minera de Chile S.A. (NYSE:SQM)
Number of Hedge Fund Holders: 34
Sociedad Química y Minera de Chile S.A. (NYSE:SQM) was incorporated in 1968 and is headquartered in Santiago, Chile. The company manufactures and markets specialty plant nutrients, iodine and its derivatives, lithium and its derivatives, potassium chloride and sulfate, and industrial chemicals. Some of its products include electrochemical materials for batteries, air conditioning chemicals, sodium nitrate, potassium nitrate, potassium chloride, and solar salts.
On November 17, Sociedad Química y Minera de Chile S.A. posted a Q3 GAAP EPADR of $3.85 and a revenue of $2.96 billion, topping analysts’ estimates by $0.47 and $180 million, respectively. The revenue climbed 347.4% on a year-over-year basis. Gross profit for the third quarter of 2022 reached $1,632.7 million, higher than the gross profit of $224.8 million for the third quarter of 2021.
Citi analyst P.J. Juvekar on November 18 maintained a Buy recommendation on Sociedad Química y Minera de Chile S.A. but slashed the price target on the shares to $112 from $123. Lithium prices rose sequentially in Q3 and in fiscal 2023, and Sociedad Química y Minera de Chile S.A. will potentially be fully exposed to the market price, the analyst told investors in a research note. He cut the price target to factor in “near-peak earnings at continued high prices.”
According to Insider Monkey’s data, 34 hedge funds were bullish on Sociedad Química y Minera de Chile S.A. at the end of September 2022, compared to 29 funds in the prior quarter. Arrowstreet Capital is the largest stakeholder of the company, with 1.3 million shares worth $125.2 million.
In addition to Albemarle Corporation, DuPont de Nemours, Inc., and Air Products and Chemicals, Inc., Sociedad Química y Minera de Chile S.A. is one of the chemical stocks backed by elite investors.
Here is what ClearBridge Investments has to say about Sociedad Química y Minera de Chile S.A. in its Q1 2021 investor letter:
“Among materials names in our structural bucket, we sold SQM as the stock hit our price target. Lithium prices remain at levels well below previous highs and while we expect they may reach higher levels in the future; high pricing likely encourages additional supply onto the market.”
5. Celanese Corporation (NYSE:CE)
Number of Hedge Fund Holders: 36
Celanese Corporation (NYSE:CE) is a Texas-based technology and specialty materials company that operates through three segments – Engineered Materials, Acetate Tow, and Acetyl Chain. The Acetyl Chain segment produces and supplies acetyl products, such as acetic acid, vinyl acetate monomers, acetic anhydride, and acetate esters, which are starting materials for colorants, paints, adhesives, coatings, and pharmaceuticals. The company also manufactures organic solvents and intermediates for pharmaceutical, agricultural, and chemical products.
On November 10, Deutsche Bank analyst David Begleiter reiterated a Buy recommendation on Celanese Corporation but trimmed the price target on the shares to $105 from $110 following the Q3 results. The analyst believes that an EPS of $13-$14 is achievable in 2023.
According to Insider Monkey’s Q3 data, 36 hedge funds were bullish on Celanese Corporation, and Warren Buffett’s Berkshire Hathaway held the leading position in the company, comprising 9.71 million shares worth $877.2 million.
Here is what Vltava Fund has to say about Celanese Corporation in its Q1 2022 investor letter:
“We then used the money freed up to, among other things, open three new positions. The stock price declines during the Russian invasion brought a lot of good prices to the market. Out of all the possibilities we considered, we picked the stocks of Celanese (CE).
Celanese is the world’s largest producer of acetic acid and its chemical derivatives, including vinyl acetate monomers and emulsions. Their applications are used in a wide range of industries, such as automotive tobacco, coatings, construction, energy, telecommunications, food, and medical. Celanese recently closed the acquisition of a large part of DuPont’s business, which will make Celanese an even bigger player in the industry while reducing the cyclicality of its business. The acquisition is quite large and should deliver significant value to shareholders that in our view is not at all presently reflected in the share price. Celanese is a business that stands more or less aside from the main interests of most investors, but it is a company with very high returns on capital, strong free cash flow, and historically very efficient resource allocation.”
4. Air Products and Chemicals, Inc. (NYSE:APD)
Number of Hedge Fund Holders: 43
Air Products and Chemicals, Inc. is a Pennsylvania-based provider of atmospheric gasses, process and specialty gasses, and relevant equipment and services worldwide. The company serves multiple industries, including refining, chemical, gasification, metals, manufacturing, food and beverage, electronics, magnetic resonance imaging, and energy production and refining. Air Products and Chemicals, Inc. is one of the premier chemical stocks to invest in.
On November 3, Air Products and Chemicals, Inc. issued guidance for FY 2023 adjusted earnings of $11.20-$11.50 per share, representing a growth of 9% to 12% over FY 2022, and Q1 adjusted EPS of $2.60-$2.80, which is 5%-13% higher than the prior-year quarter.
BofA analyst Steve Byrne on November 7 raised the price target on Air Products and Chemicals, Inc. to $308 from $281 and kept a Neutral rating on the shares. Air Products and Chemicals, Inc.’s EPS outperformed consensus estimates, and the company offered EPS guidance of $2.68-$2.88, mainly supported by higher volumes, pricing, and equity affiliate income counteracting increased costs and forex headwinds, the analyst told investors in a research note. The analyst said that mobility remains a primary long-term growth catalyst, and he forecasts low-teens earnings growth in FY23.
According to Insider Monkey’s third quarter database, 43 hedge funds were bullish on Air Products and Chemicals, Inc., compared to 33 funds in the preceding quarter. Phill Gross and Robert Atchinson’s Adage Capital Management is a prominent position holder in the company, with 225,940 shares worth $52.5 million.
Here is what Madison Funds specifically said about Air Products and Chemicals, Inc. in its Q2 2022 investor letter:
“This quarter we are highlighting Air Products and Chemicals, Inc. as a relative yield example in the Materials sector. APD is a leading global industrial gas supply company and is the largest supplier of hydrogen and helium in the world. It has a sustainable competitive advantage due to long-term customer relationships and contracts, high customer switching costs, and the mission critical nature of its products. Industrial gasses are a relatively small fraction of customers’ overall costs but are crucial to ensure uninterrupted production.
Our thesis on APD is that it appears well-positioned for consistent double-digit growth due to a large multi-year capital allocation plan, and the need for accelerating capital expenditures by its customers. It has a $25 billion backlog driven by traditional gas investments along with new growth opportunities like gasification, green hydrogen, and carbon capture. APD’s gasification technologies help improve energy efficiency and independence, which is a key focus for its customers. The company also has a strong management team with a record of expanding margins and exemplary capital allocation.
The fund purchased APD in June 2022 at $260. At the time of purchase, APD had a dividend yield of 2.6% and a relative dividend yield of 1.6x the S&P 500, which was near the high end of its historical range. The chart below shows the long-term dividend yield and relative dividend yield of the stock. The company has an A-rated balance sheet by Standard & Poor’s and is a Dividend Aristocrat that has raised its annual dividend 40 years in a row. Over the past five years, APD has increased its dividend an average of 11.5% per year. We expect similar dividend increases in the future which would help grow income and protect against the impact of inflation…” (Click here to read full text)
3. Dow Inc. (NYSE:DOW)
Number of Hedge Fund Holders: 43
Dow Inc. (NYSE:DOW) is one of the best chemical stocks to invest in. The materials science company provides solutions for packaging, infrastructure, mobility, and consumer applications in the United States, Canada, Europe, the Middle East, Africa, India, the Asia Pacific, and Latin America. Dow Inc. operates through Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials & Coatings segments. It is one of the top chemical stocks to monitor.
On October 13, Dow Inc. declared a $0.70 per share quarterly dividend, in line with previous. The dividend is distributable on December 9, to shareholders of the company as of November 30. The dividend yield on November 21 came in at 5.55%.
Fermium Research analyst Frank Mitsch on October 21 maintained a Buy recommendation on Dow Inc. but lowered the price target on the shares to $50 from $60 after the company posted Q3 results that featured a 39% sequential decline in EBITDA. However, his “oft-cited thesis” for Dow is one for dividend yield and not short-term capital gain, which has not changed as he sees the safety of the dividend and a present yield of nearly 6%.
Among the hedge funds tracked by Insider Monkey, 43 funds reported owning stakes worth $709.8 million in Dow Inc. at the end of Q3 2022, compared to 45 funds in the prior quarter worth $871.5 million. Richard S. Pzena’s Pzena Investment Management is the largest stakeholder of the company, with 7.5 million shares valued at $330 million.
2. DuPont de Nemours, Inc. (NYSE:DD)
Number of Hedge Fund Holders: 45
DuPont de Nemours, Inc. is an American multinational chemical company and its product lines include Adhesives, Advanced Printing Solutions, Construction Materials, Consumer Products, Electronic Solutions, Fabrics, Fibers & Nonwovens, Industrial Films, Medical Devices & Materials, Packaging Materials & Solutions, Personal Protective Equipment, Solar/Photovoltaic Solutions, and Water Solutions. DuPont de Nemours, Inc. is one of the best chemical stocks to monitor.
On November 8, DuPont de Nemours, Inc. reported Q3 non-GAAP earnings per share of $0.82 and a revenue of $3.30 billion, outperforming market estimates by $0.03 and $100 million, respectively. The company also announced an approval of $5.0 billion in share repurchase authorization.
RBC Capital analyst Arun Viswanathan on November 9 raised the price target on DuPont de Nemours, Inc. to $76 from $64 and kept an Outperform rating on the shares following the Q3 earnings beat. DuPont de Nemours, Inc.’s portfolio transformation is almost complete and its multiple can expand if the company can demonstrate stable demand or margins, less peak-to-trough earnings variability, and stickier price/cost in a recessionary backdrop, the analyst wrote in a research note.
According to Insider Monkey’s data, 45 hedge funds were long DuPont de Nemours, Inc. at the end of Q3 2022, compared to 44 funds in the last quarter. 40 North Management held the biggest stake in the company, comprising 6.6 million shares worth $336.4 million.
Here is what Rhizome Partners has to say about DuPont de Nemours, Inc. in its Q1 2021 investor letter:
“We have written extensively about the anticipated DuPont’s Reverse Morris Trust merger with International Flavors and Fragrances (IFF) in January of 2021. During the quarter, DuPont shares traded up significantly in anticipation of the deal. We tendered about 40% of our DuPont shares for IFF and received about half of the allocation due to pro-ration. Investors are finally starting to appreciate DuPont’s effort to cut costs, streamline operations, and spin off companies into pure-play companies that trade at higher multiples. We are still getting used to the higher multiples that investors will pay for larger market cap and pure play companies such as DuPont.”
1. Albemarle Corporation (NYSE:ALB)
Number of Hedge Fund Holders: 49
Albemarle Corporation is a North Carolina-based company that develops, manufactures, and markets engineered specialty chemicals worldwide, operating through three segments – Lithium, Bromine, and Catalysts. It is one of the premier chemical stocks to buy now. On October 25, Albemarle Corporation declared a quarterly dividend of $0.395 per share, in line with previous. The dividend is payable on January 3, 2023 to shareholders of record on December 16.
On November 8, RBC Capital analyst Arun Viswanathan raised the price target on Albemarle Corporation to $380 from $371 and kept an Outperform rating on the shares after its Q3 earnings beat. The analyst said that he remains favorable on the stock given a case of tight lithium supply and demand, although he also remains concerned about the potential for huge price swings in the lithium spot market.
According to Insider Monkey’s Q3 data, 49 hedge funds were long Albemarle Corporation, compared to 39 funds in the last quarter. Israel Englander’s Millennium Management is the largest stakeholder of the company, with 603,396 shares worth $159.5 million.
Carillon Tower Advisers made the following comment about Albemarle Corporation in its Q3 2022 investor letter:
“Albemarle Corporation is a global specialty chemicals company with leading positions in lithium, bromine, and refining catalysts. The company’s shares outperformed meaningfully in the quarter, driven largely by robust demand for lithium used to manufacture electric vehicle batteries. Albemarle is well-positioned for the accelerating adoption of electric vehicles and could benefit from the Inflation Reduction Act.”
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This article is originally published at Insider Monkey.
