In this article, we discuss the 11 best chemical stocks to invest in now.
Chemical companies across the world are scrambling to deliver on sustainability and decarbonization goals even as the demand for commodity and specialty chemicals increases and leads to robust growth in prices. However, these firms still deliver incredible value to investors. According to a report by consulting firm Deloitte, chemical volumes in the United States are set to grow at a rate of 3% in 2022, doubling from the 1.5% rate in 2021. Shipments are also predicted to increase.
Trends Shaping Global Chemical Industry
Shifting demand with respect to plastics and specialty materials, sustainability initiatives, digital transformation, and changing consumer behaviors are some of the broad trends expected to shape the future of the chemical industry. Trade organization American Chemistry Council had forecast that capital spending in the chemicals sector will top $30 billion in 2021 and continue to rise at a slower rate of around 3% in 2022. Even as production increases, supply chain issues, labor shortages, and price volatility will continue to haunt the market in 2022.
The chemicals industry is also evolving with the development of new technologies. For example, the demand for Internet of Things (IoT) devices has created an impetus for innovation. The rise of blockchain has enabled supply chain transparency and product traceability. According to a report by BASF, China and emerging economies are leading this largely positive outlook on chemicals, driven by a focus on agrochemicals and specialty chemicals.
Many chemical companies have stable businesses and provide investors with consistent dividends. In an inflationary marketplace, these traits are akin to gold. Since many analysts expect interest rates to rise and inflation problems to persist throughout 2022, the chemical sector is the ultimate value play for a safer portfolio. Some of the top chemical stocks to buy now include DuPont de Nemours Inc (NYSE:DD), Dow Inc. (NYSE:DOW), and LyondellBasell Industries N.V. (NYSE:LYB), among others discussed in detail below.
Our Methodology
The companies that operate in the chemical sector were selected for the list through a careful assessment of business fundamentals and analyst ratings to provide readers with some context for their investment choices.
For this list we also analyzed our data of close to 900 hedge funds and picked the chemical stocks that were popular among these elite money managers as of the end of September of 2021.
Marcin Balcerzak/Shutterstock.com
Best Chemical Stocks To Invest In Now
11. H.B. Fuller Company (NYSE:FUL)
Number of Hedge Fund Holders: 9
H.B. Fuller Company (NYSE:FUL) is a specialty chemicals firm. New York-based investment firm P2 Capital Partners is a leading shareholder in H.B. Fuller Company (NYSE:FUL) with 1.1 million shares worth more than $73 million.
H.B. Fuller Company (NYSE:FUL) has paid a dividend to shareholders for fifty consecutive years, an impressive record considering all the ups and downs at the market during the time. Despite pressures on margins, H.B. Fuller Company (NYSE:FUL) managed to post strong results for the third quarter and raised fiscal year guidance, saying it expected up to 18% revenue growth in 2021 and up to 17% revenue growth year-on-year in the fourth quarter.
Just like DuPont de Nemours Inc (NYSE:DD), Dow Inc. (NYSE:DOW), and LyondellBasell Industries N.V. (NYSE:LYB), H.B. Fuller Company (NYSE:FUL) is one of the stocks attracting the attention of value investors.
10. Aemetis, Inc. (NASDAQ:AMTX)
Number of Hedge Fund Holders: 12
Aemetis, Inc. (NASDAQ:AMTX) is an energy and biochemicals firm. In late December, Aemetis (NASDAQ:AMTX) announced that it had signed a deal to purchase a 125 acre former US Army facility in California. The facility has production buildings, railroad, and power substations. Aemetis (NASDAQ:AMTX) plans to use it to market low carbon renewable fuels to aviation and truck companies. The demand for these fuels has been rising as businesses aim to reduce their carbon footprints for tax benefits.
Aemetis (NASDAQ:AMTX) had revealed in early December that it had signed a seven-year deal with American Airlines to supply the latter with 280 million gallons of blended fuel containing sustainable aviation fuel. The agreement is worth more than $1 billion.
9. Huntsman Corporation (NYSE:HUN)
Number of Hedge Fund Holders: 26
Goldman Sachs analyst Robert Koort recently upgraded Huntsman Corporation (NYSE:HUN) stock to Buy from Neutral and raised the price target to $43 from $40. In an investor note, the analyst highlighted that Huntsman Corporation (NYSE:HUN) seemed undervalued given the clear visibility of the firm on capital deployment and a “firm” commitment to return excess free cash flow to shareholders. The analyst added that the “cost realignment and synergy extraction” of Huntsman Corporation (NYSE:HUN) was expected to drive margins improvement as well.
Hedge funds concur with this analysis. At the end of the third quarter of 2021, 26 hedge funds in the database of Insider Monkey held stakes worth $984 million in Huntsman Corporation (NYSE:HUN).
In its Q4 2020 investor letter, Madison Funds, an asset management firm, highlighted a few stocks and Huntsman Corporation (NYSE:HUN) was one of them. Here is what the fund said:
“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 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 economy 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 Huntsman Corporation (NYSE:HUN). The company has also been moving downstream to more value-added businesses, which may drive EBITDA multiple expansion in the future.”
8. Green Plains Inc. (NASDAQ:GPRE)
Number of Hedge Fund Holders: 29
Green Plains Inc. (NASDAQ:GPRE) makes and sells ethanol and related products. The company has diversified business and revenue streams in recent years, making moves into the AgTech and food delivery markets, evidenced by the heavy investment in Fluid Quip Technologies. Green Plains Inc. (NASDAQ:GPRE) has built a solid business around ethanol under government mandates for fuel balancing. However, even as that market grows, Green Plains Inc. (NASDAQ:GPRE) is already evolving into a tech-based agriculture play.
Oppenheimer analyst Kristen Owen recently initiated coverage of Green Plains Inc. (NASDAQ:GPRE) stock with an Outperform rating and a price target of $46, noting that Green Plains Inc. (NASDAQ:GPRE) had reached an “inflection point” and was positioned for “very high secular growth”.
7. Eastman Chemical Company (NYSE:EMN)
Number of Hedge Fund Holders: 30
Eastman Chemical Company (NYSE:EMN) is one of the most stable chemical businesses in the world. It has consecutively raised dividend payouts for 12 years and has a history of consecutive payments dating back close to three decades. On December 2, Eastman Chemical Company (NYSE:EMN) raised the quarterly dividend by 10% to $0.76 per share. The forward yield was 2.89%. Investors who want dependable options in a volatile market should certainly consider Eastman Chemical Company (NYSE:EMN).
New York-based firm Millennium Management recognizes the potential and is a leading shareholder in Eastman Chemical Company (NYSE:EMN) with 716,774 shares worth more than $72 million.
6. Air Products and Chemicals, Inc. (NYSE:APD)
Number of Hedge Fund Holders: 32
Air Products and Chemicals, Inc. (NYSE:APD) stock has gained importance among investors as the company is one of the few legacy businesses with exposure to the hydrogen market. As governments around the world enact climate-friendly policies and investors place ESG at the center of their decision-making, Air Products and Chemicals, Inc. (NYSE:APD) stock will benefit since hydrogen is seen by many climate experts as a vital pathway to net zero emissions.
Long-term growth investors have much to gain by investing in Air Products and Chemicals, Inc. (NYSE:APD) since the company also has a traditional industrial gases business that is thriving. 32 hedge funds in the database of Insider Monkey were long Air Products and Chemicals, Inc. (NYSE:APD) at the end of September with stakes worth $528 million.
Alongside DuPont de Nemours Inc (NYSE:DD), Dow Inc. (NYSE:DOW), and LyondellBasell Industries N.V. (NYSE:LYB), Air Products and Chemicals, Inc. (NYSE:APD) is one of the stocks that elite investors are buying.
5. Tronox Holdings plc (NYSE:TROX)
Number of Hedge Fund Holders: 38
In late November, UBS analyst Joshua Spector upgraded Tronox Holdings plc (NYSE:TROX) stock to Buy from Sell and raised the price target to $32 from $22, noting that new company initiatives and the prices of titanium oxide, a key product of Tronox Holdings plc (NYSE:TROX), were poised to push the share prices higher in the coming months. Potential investors should also note that strong cash flows have enabled Tronox Holdings plc (NYSE:TROX) to raise the dividend payout and authorize up to $300 million of share buybacks.
Hedge funds have been bullish on Tronox Holdings plc (NYSE:TROX) as well. Canada-based investment firm Maple Rock Capital is a leading shareholder in Tronox Holdings plc (NYSE:TROX) with 2.1 million shares worth more than $52 million.
4. Albemarle Corporation (NYSE:ALB)
Number of Hedge Fund Holders: 38
Albemarle Corporation (NYSE:ALB) is among a rare breed of chemical firms that specialize in lithium products and have strong fundamentals. The demand for lithium has skyrocketed as manufacturing firms in the electric vehicle, smartphone, and other electronic sectors seek the metal for use in key elements of their product. Lithium prices have increased because of supply chain problems as well. Albemarle Corporation (NYSE:ALB) stock stands to benefit from these twin catalysts since the demand for lithium is expected to increase further in 2022 and supply chain problems are likely to persist.
Berenberg analyst Andres Castanos-Mollor recently maintained a Buy rating on Albemarle Corporation (NYSE:ALB) stock and raised the price target to $290 from $280, underlining that the firm was achieving “solid execution” of new lithium capacity and the prices of the metal had even helped Albemarle Corporation (NYSE:ALB) deliver upgraded guidance for 2021.
In its Q3 2021 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Albemarle Corporation (NYSE:ALB) was one of them. Here is what the fund said:
“Albemarle is a global specialty chemicals company with leading positions in lithium, bromine, and refining catalysts. The firm’s shares outperformed in the quarter, driven largely by the current robust demand environment for lithium used in the manufacturing of electric vehicle batteries. As the global push towards the reduction of carbon emissions continues to gain steam, Albemarle is well positioned to benefit from the accelerating adoption of electric vehicles.”
3. LyondellBasell Industries N.V. (NYSE:LYB)
Number of Hedge Fund Holders: 39
LyondellBasell Industries N.V. (NYSE:LYB) is one of the highest yielding chemical stocks on the market. It has registered ten consecutive years of payouts and eight consecutive years of dividend growth. On November 19, LyondellBasell Industries N.V. (NYSE:LYB) declared a quarterly dividend of $1.13 per share, in line with previous. The forward yield was close to 5%. LyondellBasell Industries N.V. (NYSE:LYB) is also working on clean energy goals to improve efficiency and the stock is trading at a bargain compared to the benefits it offers to value investors.
New York-based firm Eagle Capital Management seems to understand this and is a leading shareholder in LyondellBasell Industries N.V. (NYSE:LYB) with 3.2 million shares worth more than $302 million.
In its Q3 2021 investor letter, Miller Howard Investments, an asset management firm, highlighted a few stocks and LyondellBasell Industries N.V. (NYSE:LYB) was one of them. Here is what the fund said:
“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%.”
2. Dow Inc. (NYSE:DOW)
Number of Hedge Fund Holders: 42
Dow Inc. (NYSE:DOW) posted earnings for the third quarter in late October, reporting earnings per share of $2.75, beating estimates by $0.19. The revenue over the period was $14.8 billion, up 53% year-on-year. The earnings beat was driven by rising demand for the commodity chemicals that Dow Inc. (NYSE:DOW) markets across different segments and regions. Dow Inc. (NYSE:DOW) expects supply chain problems to persist in 2022.
At the end of the third quarter of 2021, 42 hedge funds in the database of Insider Monkey held stakes worth $747 million in Dow Inc. (NYSE:DOW), up from 40 in the previous quarter worth $518 million.
1. DuPont de Nemours Inc (NYSE:DD)
Number of Hedge Fund Holders: 51
UBS analyst John Roberts recently raised the price target on DuPont de Nemours Inc (NYSE:DD) stock to $102 from $98 and kept a Buy rating, backing the firm to deliver stable earnings and growth in the coming years. The analyst highlighted that the firm was “significantly undervalued” with respect to specialty chemical and multi-industry peers. BMO Capital and Deutsche Bank are also constructive on DuPont de Nemours Inc (NYSE:DD).
DuPont de Nemours Inc (NYSE:DD) stock is also of interest to growth investors since the company has established itself as an important parts supplier to the tech industry over the past few years.
In its Q1 2021 investor letter, Rhizome Partners, an asset management firm, highlighted a few stocks and DuPont de Nemours Inc (NYSE:DD) was one of them. Here is what the fund said:
“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.”
You can also take a peek at 10 Russell 2000 Basic Materials Dividend Stocks to Buy and 10 Utilities Stocks with Over 3% Dividend Yield.
Follow Insider Monkey on Twitter
Suggested Articles:
- 10 Financial Services Dividend Stocks with Over 4% Yield
- 15 Best Momentum Stocks To Invest In
- 10 Cheap Hemp Stocks Redditors are Buying
Disclosure. None. 11 Best Chemical Stocks To Invest In Now is originally published on Insider Monkey.
