We recently compiled a list of the 11 Best Small Cap Chemical Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Ingevity Corporation (NYSE:NGVT) stands against the other best small cap chemical stocks to buy.
Chemical Industry: A Focus on Innovation and Sustainability
The chemical industry plays a crucial role in the global economy, contributing trillions of dollars to the world’s GDP. This sector is essential for producing a wide range of materials used in everyday products, from fertilizers and plastics to pharmaceuticals and construction materials.
Recent trends in the chemical industry indicate a strong focus on sustainability and innovation. Companies are increasingly investing in low-carbon technologies and circular economy practices, aiming to reduce greenhouse gas emissions and improve resource efficiency. According to a report by The Business Research Company, the green chemicals market was valued at $108.53 billion in 2023. The market is expected to grow at a compound annual growth rate (CAGR) of 10.4% during 2024-2028 to reach a value of $179.96 billion by the end of the forecast period.
The rise in demand for biodegradable materials and eco-friendly chemicals reflects shifting consumer preferences towards sustainability. This trend is driving companies to innovate and diversify their product offerings.
According to the IONICS report on Chemicals & Mining Industry Trends for 2025, biodegradable chemicals are set to gain widespread adoption in agriculture and consumer products over the next 4-6 years. This shift is largely fueled by advancements in technology and increased support from regulations, as more consumers seek sustainable alternatives. As a result, the market for these eco-friendly products is expected to grow significantly.
Government regulations promoting the use of green chemicals also play a crucial role, as they encourage industries to shift towards renewable resources and reduce reliance on non-renewable materials.
READ ALSO: 8 Best Fertilizer Stocks To Buy Now and 8 Best Plastics Stocks To Invest In Now.
Deloitte’s 2025 chemical industry outlook highlights that to remain competitive in a low-carbon economy, companies are focusing on innovation in three main areas: products, processes, and ecosystems. Many chemical firms are enhancing their product offerings to improve both performance and sustainability. Additionally, they are adopting process innovations, such as digital automation and process intensification, to make operations more efficient and environmentally friendly. For example, some companies are using AI-driven analytics to optimize production and reduce waste.
Ecosystem innovation is also becoming important as companies collaborate with other industry players, research institutions, and startups to develop sustainable solutions. This collaborative approach includes initiatives that aim to promote recycling and material reuse. To strengthen their market position, chemical companies are increasingly integrating these innovative strategies, combining capital investments in process improvements with research and development efforts for product enhancements.
An engineer in her office examining a blueprint, surrounded by engineering components.
Our Methodology
To compile our list of the 11 best small-cap chemical stocks to buy according to hedge funds, we used stock screeners from Finviz and Yahoo Finance. We also reviewed our own rankings and consulted various online resources to compile a list of the best small-cap chemical stocks. Please note that we defined small-cap stocks as those with a market capitalization between $300 million and $2 billion.
From an initial pool of more than 20 small-cap chemical stocks that met our criteria, we focused on the top 11 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds. The 11 best small-cap chemical stocks to buy are ranked in ascending order based on the number of hedge funds holding stakes in them.
Why do we care about what hedge funds do? 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Ingevity Corporation (NYSE:NGVT)
Market Capitalization: $1.69 Billion
Number of Hedge Fund Holders: 17
Ingevity Corporation (NYSE:NGVT) is a specialty chemicals company that produces performance chemicals, high-performance carbon materials, and engineered polymers. Their products are used in various applications, including adhesives, agrochemicals, and automotive components.
In the third quarter of 2024, Ingevity Corporation (NYSE:NGVT) reported net sales of $376.9 million, a 16% decline compared to the same period last year. This decrease was primarily due to restructuring efforts in the Performance Chemicals segment and adverse weather affecting the Road Technologies product line. However, the Performance Materials segment saw sales increase by 3% to $151.1 million, driven by strategic pricing adjustments and improved operational efficiency, resulting in an EBITDA of $80.6 million with a strong margin of 53.3%.
The Advanced Polymer Technologies segment also performed well, with sales rising 14% to $48.8 million, benefiting from recovering volumes in the market, particularly in Asia. Despite facing pricing pressures and unfavorable foreign exchange rates, this segment maintained an EBITDA margin of 20.1%.
The company is actively repositioning its Performance Chemicals segment by exiting lower-margin markets and optimizing its operations. Ingevity Corporation (NYSE:NGVT) incurred before-tax restructuring charges of $86.9 million during the quarter, primarily related to closing its Crossett facility and terminating a long-term supply contract.
Despite the challenges faced, during Q3, Ingevity Corporation (NYSE:NGVT) achieved $18 million in savings from the repositioning efforts in the Performance Chemicals segment. The company is on track to meet its target of $65 million to $75 million in savings for 2024. With a focus on executing its strategic initiatives and improving operational efficiencies, Ingevity Corporation (NYSE:NGVT) presents a compelling investment opportunity in the specialty chemicals sector, making it an attractive stock.
As of the third quarter of 2024, Ingevity Corporation (NYSE:NGVT) was held by 17 hedge funds, according to Insider Monkey’s database. SouthernSun Asset Management, LLC stated the following regarding Ingevity Corporation (NYSE:NGVT) in its “SouthernSun Small Cap Strategy” third quarter 2024 investor letter:
“Ingevity Corporation (NYSE:NGVT) was one of the top detractors in the Small Cap strategy in the third quarter. Ingevity manufactures specialty chemicals that are used in a wide range of industrial applications and consumer products as well as activated carbon used to reduce gasoline vapor emissions in automobiles. The company is undergoing a strategic shift to reduce its exposure to crude tall oil (CTO), a key raw material in its Performance Chemicals segment. Within the last year, Ingevity has announced the closure of two of its three refineries and is consolidating its one remaining facility. In July of this year, the company terminated its final CTO supply agreement, which resulted in a settlement charge of $100 million. In addition, after the end of Q3, the company announced the departure of John Fortson, CEO, and named Luis Fernandez-Moreno, a long-time board member, as interim CEO. While these changes have created a lot of noise in recent months, we believe that the business will be much better positioned moving forward with a significantly lower cost structure. Importantly, these strategic decisions have all related to the Performance Chemicals operating segment. The other two operating segments have not been impacted, and while the Advanced Polymer Technologies segment has experienced some headwinds due to broader weakness in industrial end markets, the Performance Materials business continues to benefit from both market and regulatory tailwinds as well operational efficiencies. We continue to assess our position in light of the recent strategic shifts and management changes including ongoing discussions with new and existing leaders.”
Overall, NGVT ranks 9th among the 11 best small-cap chemical stocks to buy according to hedge funds. While we acknowledge the potential of chemical companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NGVT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.