In this article, we will be talking about 9 Undervalued Chemical Stocks to Buy According to Hedge Funds.
The chemical industry is valued at between $800 and $900 billion, and it is also the backbone of the US industrial sector. In 2023 alone, it directly employed over 900,000 people in over 14,000 industrial sites and created over 70,000 chemical goods. In addition, it also attracted foreign direct investment (FDI) of roughly $766.7 billion.
In a similar context, it is important to mention that the U.S. specialty chemicals industry was projected at $225.03 billion in 2025 and is said to grow to $317.55 billion by 2033 at a compound annual growth rate (CAGR) of 4.43%. This increase is mostly attributable to the use of sustainable and high-performance chemicals, growing industrial demand, and growing uses in the automotive, electronics, construction, and personal care industries.
Coatings and paints held the biggest share in 2025 (28.45%) due to their use in industrial, construction, and automotive applications, while catalysts are expected to grow at the fastest rate, which is 7.21% CAGR. On the other hand, automotive accounted for 31.62% of applications, while personal care is expected to increase at the quickest rate (8.03% CAGR). Granules will grow at the highest rate (7.45% CAGR), while liquids had the largest share (40.13%) by form.
Furthermore, it is reported that manufacturing made up 35.27% of end-use, while the fastest-growing sector is anticipated to be healthcare, with a 7.88% CAGR. Direct sales also made up 38.44% of distribution, but it is projected that internet retail will increase at the quickest rate, with a compound annual growth rate of 8.12%.
North America dominated the specialty chemicals market in 2025 with a 32.47% share, which was driven by industrialization, advanced manufacturing, and strong demand across key sectors. This expansion shows the growing importance of high-performance, environmentally friendly chemical solutions in a variety of industries.
With that being said, let’s now look at the best chemical stocks.
Our Methodology
For our methodology, we first filtered stocks with a forward P/E ratio of 20 or less. From this list, we selected the top nine stocks and ranked them in ascending order based on the total number of hedge fund holders as of Q3 2025, according to the Insider Monkey database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
Here is our list of the 9 undervalued chemical stocks to buy according to hedge funds.
9. Sasol Limited (NYSE:SSL)
Number of Hedge Fund Holders: 13
Forward PE Ratio: 5.34
Sasol Limited (NYSE:SSL) is one of the best chemical stocks on our list.
TheFly reported on February 9 that Goldman Sachs downgraded SSL from Buy to Neutral and set a price target of ZAR 118. The firm cited a weak product price outlook, which is expected to constrain upward earnings revisions in the near term.
Goldman also noted that, amid ongoing volatility in oil prices and broader macroeconomic conditions, the stock has limited potential for a significant re-rating, making it less attractive compared with other sector peers. Despite any operational strengths, the combination of price pressures and external market risks has led the firm to adopt a more cautious view on SSL’s near-term performance.
Earlier on January 22, Sasol Limited (NYSE:SSL) revised its FY26 fuel sales outlook upward to 5–10% growth compared with FY25, an increase from the prior 0–3% forecast. The improvement is supported by stronger Natref performance and additional production volumes from SSL’s Prax South Africa capacity. On the Southern Africa coal side, the destoning plant reached beneficial operation in December 2025, with average sinks now tracking the lower end of the 12%–14% guidance range, marking a key milestone in coal quality enhancement.
In contrast, gas production volumes were revised down to 0–5% below FY25 due to PSA and Central Térmica de Temane delays and softer demand. Chemical revenues remain pressured globally, although Chemicals Africa showed slight sales volume improvements supported by operational gains, with further ramp-up expected in the second half of FY26.
Sasol Limited (NYSE:SSL) is a South African energy and chemical company producing fuels, chemicals, and energy solutions. It focuses on innovation and sustainability, supplying industrial markets globally while exploring advanced technologies to optimize production, reduce environmental impact, and support the transition toward cleaner energy solutions.
8. Cabot Corporation (NYSE:CBT)
Number of Hedge Fund Holders: 23
Forward PE Ratio: 12.08
Cabot Corporation (NYSE:CBT) is among the best chemical stocks.
TheFly reported on February 5 that UBS raised CBT’s price target to $81 from $74 and gave it a Neutral rating.
In a major developmental news, on February 18, Cabot Corporation (NYSE:CBT) announced that its circular reinforcing carbon production is now available in the Asia Pacific region. The company’s manufacturing facilities in Cilegon, Indonesia, and Tianjin, China, have been successfully validated to produce these products using its EVOLVE Sustainable Solutions technology platform.
The circular reinforcing carbons are derived from tire pyrolysis oil (TPO) from end-of-life tires and follow an ISCC PLUS mass balance approach. With these sites operational, CBT now has production capabilities across all major regions, Asia, Europe, and the Americas, supporting tire circularity and sustainability while strengthening regional supply chains and meeting growing global demand for sustainable tire materials.
Cabot Corporation (NYSE:CBT) is a global specialty chemicals and performance materials company. It develops innovative solutions for industries like automotive, electronics, and energy, focusing on sustainability and advanced materials.
