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.
7. Avient Corporation (NYSE:AVNT)
Number of Hedge Fund Holders: 32
Forward PE Ratio: 13.93
Avient Corporation (NYSE:AVNT) is one of the best chemical stocks on our list.
TheFly reported on February 13 that Baird raised its price target on AVNT to $46 from $34 and maintained a Neutral rating on the stock. The update came after the company’s recent results, which showed continued strong execution across its operations.
On February 12, Avient Corporation (NYSE:AVNT) stated that it projects adjusted earnings per share (EPS) to climb between 4% and 12%, or $2.93 and $3.17, for the entire year 2026. Additionally, the estimate projects a free cash flow of more than $200 million and an adjusted EBITDA of $555 million to $585 million, or 2% to 7% growth. This forecast gives the business more alternatives for future capital deployment and, when combined with a healthy cash position on the balance sheet, essentially matches Wall Street’s expectations.
In more recent news, on February 16, AVNT Corporation reported that its Board of Directors declared a quarterly cash dividend of $0.275 per share on its common stock. Shareholders of record as of March 17, 2026, are expected to receive the dividend on April 3, 2026.
Avient Corporation (NYSE:AVNT) is a global provider of specialty polymers and colorants, delivering innovative, sustainable solutions across industries like packaging, automotive, and healthcare to enhance product performance and environmental responsibility.
6. Ashland Inc. (NYSE:ASH)
Number of Hedge Fund Holders: 32
Forward PE Ratio: 15.51
Ashland Inc. (NYSE:ASH) is one of the best chemical stocks on our list.
On February 9, TheFly reported that Morgan Stanley increased its price target for ASH from $60 to $63 and kept an Equal Weight rating on the shares. Following the company’s fiscal first-quarter results, the firm modified, claiming that a minor decrease in FY26 EBITDA predictions was overcome by stronger peer valuations, which supported the higher target.
On the same day, Ashland Inc. (NYSE:ASH) also declared that its application for its agrimer eco-coat polymer seed coating under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) has been formally accepted by the U.S. Environmental Protection Agency (EPA). According to rule 40 CFR 180.960, the product, which is based on ASH’s exclusive Transformed Vegetable Oils (TVO) technology, is now authorized for use in all food and non-food pesticide formulations.
This approval permits the eco-coat polymer to be bought, sold, and tested by U.S. growers as well as those in Latin America, Europe, and other previously authorized regions. The milestone marks a major advancement in the worldwide commercialization of ASH’s sustainable crop-care products and increases prospects for cooperation with the company’s clients and partners.
Ashland Inc. (NYSE:ASH) is a global specialty chemicals company providing solutions for pharmaceuticals, coatings, adhesives, and personal care. Ashland focuses on innovation and sustainability, delivering high-performance products that improve efficiency, quality, and environmental responsibility across diverse industries worldwide.
5. PPG Industries, Inc. (NYSE:PPG)
Number of Hedge Fund Holders: 34
Forward PE Ratio: 16.37
PPG Industries, Inc. (NYSE:PPG) is placed fifth on our list of best chemical stocks.
On February 18, Evercore ISI raised its price target on PPG by $16. Similarly, on February 12, Mizhou also raised its price target for the stock by $15. Moreover, on January 30, Bernstein also raised its price target for PPG to $130 from $123 and maintained an Outperform rating. The firm noted that PPG’s Q4 results were well received by the market despite an EPS miss and highlighted the company’s favorable positioning for the year ahead.
More recently, on February 11, PPG Industries, Inc. (NYSE:PPG) unveiled its 2026 global automotive color report in Shanghai. The report’s topic is “Parallels,” which highlights how personal expression may coexist with external forces. The focal point of the collection is Secret Safari, the 2026 Color of the Year. It complements sport and off-road vehicle body panels, wheels, and trim well since it is a mid-tone yellow-green with organic undertones. The event showcased PPG’s expertise in premium automobile finishes and component styling, as well as the company’s strategic focus on China through local collaborations, including a multi-year endeavor with Xiaomi to create 100 new hues and a collaborative color lab with Chery.
PPG Industries, Inc. (NYSE:PPG) is a global supplier of paints, coatings, and specialty materials, delivering innovative, high-performance solutions for industrial, automotive, and consumer markets worldwide.
4. Eastman Chemical Company (NYSE:EMN)
Number of Hedge Fund Holders: 40
Forward PE Ratio: 13.75
Eastman Chemical Company (NYSE:EMN) is one of the best chemical stocks.
TheFly reported today, on February 18, that Evercore ISI raised its price target on EMN by $5. Similarly, earlier on February 4, RBC Capital increased its price target on EMN from $70 to $79 and maintained a Sector Perform rating. The update followed the company’s Q4 results, with investors showing cautious optimism that commodity prices may have bottomed. A complete recovery would take longer than expected, though, as RBC noted that a significant amount of EMN’s product line is intermediate in nature. This implies that short-term growth can be modest even in a positive market climate.
Additionally, Eastman Chemical Company (NYSE:EMN) announced on January 29 its financial results for the fourth quarter and the full year 2025. Their achievements show prudent management and robust cash flow in a difficult economic climate. The report highlights that the company’s operational activities generated approximately $1 billion, which shows its capacity to sustain financial stability despite economic challenges.
The report also highlights that the company produced more than 2.5 times as much recycled material and generated more than $60 million in income at the Kingsport methanolysis plant. Additionally, EMN also exceeded its cost reduction goals by achieving savings of almost $100 million. The business also kept up its shareholder return program, increasing its dividend for the sixteenth year in a row and giving back over $500 million in dividends and share repurchases.
Eastman Chemical Company (NYSE:EMN) is a global specialty chemical company providing innovative, sustainable materials for industries like packaging, automotive, and manufacturing.
3. Celanese Corporation (NYSE:CE)
Number of Hedge Fund Holders: 45
Forward PE Ratio: 13.84
Celanese Corporation (NYSE:CE) is one of the best chemical stocks.
On February 18, CE’s price target was raised at Evercore ISI and Mizhou. Evercore ISI raised it by $18 while Mizhou raised it by $10. Similarly, earlier on February 5, Jefferies also upgraded CE from Hold to Buy and raised the price target to $86 from $43. While the firm expects the company’s first-half 2026 earnings to remain somewhat uneven, it highlighted that CE provides substantial operating leverage to a potential demand cycle.
According to Jefferies, more project discipline and rationalization in the chemical industry, as well as cumulative economic stimulus in the U.S. and Europe, are gradually replacing the protracted narrative of weak demand and industry de-stocking, indicating that the current climate offers a timely opportunity to buy the dips.
In a similar context, Celanese Corporation (NYSE:CE) disclosed its Q4 and full-year 2025 results on February 17, highlighting the difficulties caused by year-end destocking and pricing pressures. The report states that operating cash flow was $1.1 billion and free cash flow was $773 million, while full-year net sales decreased 7% to $9.5 billion. GAAP EPS indicated a $10.44 loss because of $1.6 billion in specific items, while adjusted EPS was $3.98.
In the fourth quarter, net sales were $2.2 billion, with adjusted EPS of $0.67. The Acetyl Chain segment struggled, but Engineered Materials remained steady. Cost savings, portfolio actions, and the $500 million Micromax divestiture supported cash generation and deleveraging, which helps to keep CE on track with its strategic priorities.
Celanese Corporation (NYSE:CE) is a global chemical company producing engineered polymers and acetyl products, delivering innovative, sustainable solutions for industries like automotive, electronics, and consumer goods.
2. Axalta Coating Systems Ltd. (NYSE:AXTA)
Number of Hedge Fund Holders: 46
Forward PE Ratio: 13.01
The next stock on our list is Axalta Coating Systems Ltd. (NYSE:AXTA).
TheFly reported on February 12 that RBC Capital raised its price target on AXTA to $35 from $33, while keeping a Sector Perform rating. It was noted that lower volumes caused the company to fall short of fourth-quarter projections by a small margin, an increase of about 50 basis points, which helped to support the revised target.
More recently, on February 15, it was announced that AkzoNobel and Axalta Coating Systems Ltd. (NYSE:AXTA) had concluded an all-stock merger of equals and created a coatings company that is more regionally diverse and expansive. This combination aims to expand both companies’ product portfolio and geographic reach, and it may also generate new growth opportunities and operational synergies.
The deal came after AXTA’s record-breaking 2025 results, which show the company’s tenacity in a volatile environment. Investors will also be keeping an eye on the combined company’s ability to capitalize on these synergies and sustain AXTA’s profitability profile. As the deal closes, regulatory clearances and integration developments are expected to have an impact on market sentiment.
Axalta Coating Systems Ltd. (NYSE:AXTA). is a global leader in liquid and powder coatings, serving automotive, industrial, and commercial markets with innovative, sustainable coating solutions.
1. International Flavors & Fragrances Inc. (NYSE:IFF)
Number of Hedge Fund Holders: 50
Forward PE Ratio: 18.64
International Flavors & Fragrances Inc. (NYSE:IFF) is one of the best chemical stocks.
TheFly reported on February 17 that Deutsche Bank and Mizhou raised their price targets on IFF. Deutsche Bank raised its price target by $20 while Mizhou raised it by $7. Similarly, a day earlier on February 16, Bank of America also raised its price target on IFF to $100 from $88 and kept a Buy rating.
According to BofA, the company’s fourth-quarter results and 2026 predictions eased concerns about its European counterparts’ slower performance. The analyst underlined that a shift in strategy toward targeted business investments and organic development, which was initiated about two years ago and required additional funding, is now starting to bear fruit.
Regarding the company’s results, International Flavors & Fragrances Inc. (NYSE:IFF) published its Q4 and full-year 2025 report on February 11, 2026. In addition to Q4 net sales of $2.59 billion, which are down 7% year over year but up 1% on a currency-neutral basis, the report reports adjusted EPS of $0.80 and GAAP EPS of $0.07. Health & Biosciences and Scent saw mid-single-digit growth, while Taste saw low-single-digit gains.
The report also shows that full-year net sales totaled $10.89 billion, which is down 5% but up 2% on a currency-neutral basis. Adjusted operating EBITDA rose 7%, which is supported by productivity, volume, and pricing. Operating cash flow was $850 million, with free cash flow of $256 million.
Moreover, for 2026, the company expects sales of $10.5–10.8 billion and adjusted EBITDA of $2.05–2.15 billion, with currency-neutral sales growth of 1%–4% and EBITDA growth of 3%–8%.
International Flavors & Fragrances Inc. (NYSE:IFF) creates flavors, fragrances, and cosmetic ingredients for food, beverages, personal care, and household products worldwide, focusing on innovation and sensory experiences to enhance consumer products.
While we acknowledge the potential of IFF to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than IFF and that has 100x upside potential, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published on Insider Monkey. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
