Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Three Most Popular Chemicals Companies Among Hedge Funds

Even in times of serious volatility, the chemical industry has been one of the most stable and consistent dividend paying segments of the economy during the past few years. However, in the last two months, the Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), has turned negative and shown declines of 0.1% and 0.3% in July and August respectively after remaining up by 0.5% in May and June. Although the CAB was still up 1.8% year-over-year on August 25, according to the Chief Economist at ACC, Kevin Smith, it is pointing towards “slow gains in business activity into the early part of 2016”. For an investor keeping track of the trends in an industry is important, but equally if not more important is to keep a track on what smart money thinks of companies from the particular industry. To figure that out, we decided to go through the recent 13F filings submitted by over 700 hedge funds we track and uncover three most popular chemical industry stocks among hedge funds heading into the third quarter, which we will be revealed further in this article.

Air Products and Chemicals APD

SpaceKris /

We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about 6 basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by over 60 percentage points (118% return vs. S&P 500’s 57.6% gain) over the last 36 months (see the details here).

3. Eastman Chemical Company (NYSE:EMN)

Investors with Long Positions (as of June 30): 39
Aggregate Value of Investors’ Holdings (as of June 30): $1.368 Billion

The Eastman Chemical Company (NYSE:EMN)’s stock had a terrific rise of 18.7% during the second quarter, which perhaps explain why the number of hedge funds that held the stock went up by one and the aggregate value of hedge funds’ holdings jumped by $195 million during this period. However, despite that significant appreciation during the April-June period, the stock has dropped significantly in the past two months and are now trading 8.2% in red in year-to-date terms. The company has consistently increased its quarterly dividend during the past six years and its annual dividend yield currently hovers around 2.30%. Though the company’s sales on a constant currency basis are  growing at around 8%, the appreciation of the dollar can have a significant impact on its top line results because it operates 45 plants in 16 countries and 57% of its revenues come outside the United States. Analysts have also raised concerns over the very high debt of $7.323 billion the company currently carries on its balance sheet. Meanwhile, David Cohen and Harold Levy‘s Iridian Asset Management inched up its stake in Eastman Chemical Company (NYSE:EMN) by 10% to over 4.83 million shares during the April-June period and continued to remain its largest shareholders among the hedge funds we track.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.