Below we discuss the 5 best chemical stocks to buy for 2021. To read our detailed analysis of the chemical industry’s outlook for 2021 and some of the top industry players, read 10 Best Chemical Stocks to Buy for 2021.
WR Grace is a Maryland-based company that produces specialty chemicals and materials with a particular focus on catalysts and specialty silica. The current W. R. Grace emerged from Chapter 11 bankruptcy after the original, which was founded in 1854, went bankrupt due to asbestos litigation. The company has a strong market presence, with around 80% of revenue garnered from segments where the company ranks first or second, and a competitive advantage with its considerable patent trove, high barriers of entry, its customer intimacy, long-term partnerships, and broad, highly differentiated portfolio of products. There has also been some speculation that W. R. Grace could be a potential target for Honeywell in the past, although nothing has come out from it.
In terms of the long thesis, many elite funds like GRA for its organic growth prospects, its potential for solid margins, and the company’s status in an industry with few players that have displayed pricing power. Although GRA’s stock performance has lagged some of its peers due to some delays and margin pressure, many bulls believe it is only a matter of time before those issues dissipate and GRA shares begin closing that gap. Moreover, GRA’s near ‘pure-play’ status as a catalyst producer could make it an M&A target in the eyes of some funds.
The company said in September 2020 that it expects a strong improvement and growth in sequential sales for the fourth quarter of 2020. The company is seeing a growing demand in specialty catalysts and materials technologies. In the third quarter, it posted a non-GAAP EPS of $0.56, which beat the Street’s forecast by $0.03. Adjusted gross margin in the period jumped by 410 basis points sequentially.
As of the end of the September quarter, David S. Winter And David J. Millstone’s 40 North Management owns 9,865,008 share of Grace, worth $397.5 million. Overall, 39 hedge funds tracked by Insider Monkey had positions in W.R. Grace entering the fourth quarter.