12 Best Specialty Chemical Stocks To Buy Now

In this article, we discuss 12 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.

5. Avantor, Inc. (NYSE:AVTR)

Number of Hedge Fund Holders: 40

Ranked 5th on our list of the best specialty chemical stocks, Avantor, Inc. (NYSE:AVTR) delivers essential products and services to clients within the biopharmaceutical, healthcare, education, government, advanced technologies, and applied materials sectors across the Americas, Europe, Asia, the Middle East, and Africa. The company also offers logistics, glassware autoclaving, chemical and equipment monitoring, and a range of scientific research support services. Established in 1904, Avantor, Inc. (NYSE:AVTR) has its headquarters in Radnor, Pennsylvania.

According to Insider Monkey’s second quarter database, 40 hedge funds were bullish on Avantor, Inc. (NYSE:AVTR), in contrast to the previous quarter when 51 funds had invested in the stock. Michael Kahan and Jeremy Kahan’s North Peak Capital is the largest position holder in the company, with approximately 6.5 million shares worth $133.14 million.

ClearBridge Mid Cap Growth Strategy made the following comment about Avantor, Inc. (NYSE:AVTR) in its Q4 2022 investor letter:

“The health care sector also proved challenging as many of our portfolio companies continued to be plagued by headwinds from the third quarter: extended sales cycles and a drop off in COVID-19 revenues. We took the opportunity to re-evaluate each of our health care holdings and reposition ourselves for greater opportunities. We exited our position in Avantor, Inc. (NYSE:AVTR), provider of mission-critical products and services to customers in the biopharma, healthcare, education and government industries, due to the company’s poor execution in integrating its acquisitions of Ritter GmbH and Masterflex while incurring higher leverage.”

4. Albemarle Corporation (NYSE:ALB)

Number of Hedge Fund Holders: 41

Albemarle Corporation (NYSE:ALB) is a global company involved in the development, production, and distribution of specialty chemicals. It is one of the best chemical stocks to buy now. The company’s operations are divided into three segments – Lithium, Bromine, and Catalysts. Albemarle Corporation (NYSE:ALB)’s products cater to different industries including energy storage, petroleum refining, automotive, consumer electronics, construction, crop protection, lubricants, and pharmaceuticals. 

On September 12, Albemarle Corporation (NYSE:ALB) announced that it has received approval from the U.S. Department of Defense for a $90 million grant for the expansion of domestic mining and lithium production for the U.S. battery supply chain. The company plans to utilize the grant to acquire mining equipment as part of its plan to reopen its lithium mine in North Carolina.

According to Insider Monkey’s second quarter database, 41 hedge funds were bullish on Albemarle Corporation (NYSE:ALB), same as the preceding quarter. Philippe Laffont’s Coatue Management held a significant position in the company, with 691,853 shares worth $154.35 million.

Aristotle Small/Mid Cap Equity Composite made the following comment about Albemarle Corporation (NYSE:ALB) in its second quarter 2023 investor letter:

“Albemarle Corporation (NYSE:ALB), the world’s largest lithium producer was sold from the portfolio amidst the announcement from Chile’s president that he would nationalize the country’s lithium industry and in time transfer control from SQM and Albemarle to a separate state-owned company effectively changing long-term risk/reward ratio of the stock, in our view.”

3. Air Products and Chemicals, Inc. (NYSE:APD)

Number of Hedge Fund Holders: 43

Air Products and Chemicals, Inc. (NYSE:APD) supplies atmospheric gasses, process and specialty gasses, along with equipment and associated services across the Americas, Asia, Europe, the Middle East, India, and other regions. The company was established in 1940 and is headquartered in Allentown, Pennsylvania. Air Products and Chemicals, Inc. (NYSE:APD) ranks high on our list of the best specialty chemical stocks.

On August 3, Air Products and Chemicals, Inc. (NYSE:APD) announced third quarter results for fiscal year 2023. The company reported a non-GAAP EPS of $2.98, outperforming market consensus by $0.07, while its revenue came in at $3.03 billion, missing estimates by $254.21 million.

According to Insider Monkey’s second quarter database, 43 hedge funds were bullish on Air Products and Chemicals, Inc. (NYSE:APD), compared to 48 funds in the prior quarter. Dmitry Balyasny’s Balyasny Asset Management is the leading stakeholder of the company, with 272,134 shares worth $81.5 million.

ClearBridge Large Cap Value Strategy made the following comment about Air Products and Chemicals, Inc. (NYSE:APD) in its Q4 2022 investor letter:

“In the materials sector, Air Products and Chemicals, Inc. (NYSE:APD)’s ability to recover higher energy costs, particularly in Europe as it continues to execute on its growth projects, has helped it to generate a positive return for the year and made it a strong contributor. The capital APD is deploying into hydrogen products globally is finally getting noticed as Europe is looking to diversify away from Russian natural gas and the Inflation Reduction Act (IRA) benefits domestic investments in renewables, such as APD’s $4.5 billion blue hydrogen project in Louisiana and its $4 billion green hydrogen production facility in Texas. APD is also teaming up with World Energy to build a $2.5 billion sustainable aviation fuel production facility in Southern California, a project that should also benefit from the IRA.”

2. Ecolab Inc. (NYSE:ECL)

Number of Hedge Fund Holders: 56

Ecolab Inc. (NYSE:ECL) provides water, hygiene, and infection prevention solutions and services globally. It functions through three segments – Global Industrial, Global Institutional & Specialty, and Global Healthcare & Life Sciences. Ecolab Inc. (NYSE:ECL) markets its products through field sales, corporate account personnel, distributors, and dealers. It is one of the best chemical stocks. Established in 1923, the company is headquartered in Saint Paul, Minnesota.

On August 3, Ecolab Inc. (NYSE:ECL) declared a $0.53 per share quarterly dividend, in-line with previous. It is to be paid on October 16 to shareholders of record as of September 19.

According to Insider Monkey’s second quarter database, 56 hedge funds were bullish on Ecolab Inc. (NYSE:ECL), up from 53 funds in the last quarter. Bill & Melinda Gates Foundation Trust held the largest position in the company, with 5.22 million shares worth $974.16 million.

Madison Sustainable Equity Fund made the following comment about Ecolab Inc. (NYSE:ECL) in its second quarter 2023 investor letter:

“Ecolab Inc. (NYSE:ECL) is benefiting from price increases put in place last year to offset inflationary pressures. The price increases more than offset flattish volumes and are modestly ahead of raw material inflation resulting in a return to earnings growth. We believe that Ecolab’s profitability will improve going forward from market share gains and its fast-growing bioprocessing business.”

1. Linde plc (NYSE:LIN)

Number of Hedge Fund Holders: 70

Linde plc (NYSE:LIN) is an industrial gas company that operates across North and South America, Europe, the Middle East, Africa, and the Asia Pacific. They provide a variety of gasses, from common ones like oxygen and nitrogen to specialty gasses like electronic and acetylene. Linde plc (NYSE:LIN) serves a range of industries including healthcare, chemicals, manufacturing, mining, and more. It is one of the best chemical stocks to buy now.

On July 17, Linde plc (NYSE:LIN) announced the signing of two significant agreements in Brazil to source renewable energy, boosting its global renewable energy capacity by over 60%. White Martins, a subsidiary of Linde plc (NYSE:LIN), has entered into these agreements, securing a supply of more than 2 million megawatt-hours of renewable energy annually. This allows Linde plc (NYSE:LIN) to replace nearly half of its current power usage in Brazil.

According to Insider Monkey’s second quarter database, 70 hedge funds were bullish on Linde plc (NYSE:LIN), same as the preceding quarter. Alexander Mitchell’s Scopus Asset Management is the leading position holder in the company, with 116,885 shares worth $44.54 million.

Madison Funds made the following comment about Linde plc (NYSE:LIN) in its fourth-quarter 2022 investor letter:

“Linde plc (NYSE:LIN) stock was strong during the fourth quarter following a solid third quarter. Linde remains well positioned with the passage of the Inflation Reduction Act and energy transition with carbon dioxide sequestration opportunities, gasification services, and various hydrogen projects. Linde and Schlumberger announced that they entered into a collaboration of carbon capture, utilization, and sequestration (CCUS) projects to accelerate decarbonization solutions across industrial and energy sectors. The collaboration will combine decades of experience in carbon dioxide capture and sequestration. The collaboration will focus on hydrogen and ammonia production where carbon dioxide is a by-product. The International Energy Agency estimates that 6 Gigatons of carbon dioxide will need to be abated with CCUS in order to reach net zero by 2050. During the quarter, Linde also announced that it became a signatory to the United Nations Global Compact (UNGC), the world’s largest corporate sustainability initiative. As a signatory, Linde has committed to aligning its strategy and activities with the UNGC’s Ten Principles across human rights, labor, environment, and anti-corruption.”

Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily enewsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also check out 11 Best Cybersecurity Stocks Hedge Funds Are Buying and 13 Best Robotics Stocks To Buy Now. 

Suggested articles:

• 10 Best ASX Stocks To Invest In
• 12 Best Automotive Stocks To Buy Now
• 13 Best Food Stocks To Buy Now

Disclosure: None. 12 Best Specialty Chemical Stocks To Buy Now is originally published on Insider Monkey.