8. Air Products and Chemicals, Inc. (NYSE:APD)
Number of Hedge Fund Investors: 47
Market Capitalization as of October 10, 2024: $69.80 billion
Air Products and Chemicals, Inc. (NYSE:APD) was established in 1940 and now employs 19,000 people worldwide. It is one of the world’s top providers of industrial gas. The company is the world’s biggest provider of helium and hydrogen. Serving clients in many areas such as chemicals, energy, healthcare, metals, and electronics, it has a distinctive portfolio. In fiscal 2023, the company brought in $12.6 billion in revenue.
Air Products enjoys the advantages of operating in a highly advantageous industry. Public industrial gas companies have continuously produced profitable returns despite selling industrial gases, which are essentially commodities, due to their economic moats. Although they usually make up a very minor portion of customers’ expenses, industrial gases are an essential component to maintaining production. Customers will therefore frequently sign long-term contracts and pay a premium to guarantee the seamless operation of their company. The moats of industrial gas producers are strengthened by long-term contracts and high switching costs, which enable them to provide profitable returns and a consistent cash flow stream.
The London Company Large Cap Strategy stated the following regarding Air Products and Chemicals, Inc. (NYSE:APD) in its Q2 2024 investor letter:
“Air Products and Chemicals, Inc. (NYSE:APD) – We added to our position in APD this year and the stock subsequently outperformed during 2Q. APD continually posts results for its base business comparable to that of its closest industrial gas peers, and margins have recovered back towards industry-leading levels. We believe the offtake announcement in June between APD and Total Energies for 30% of NEOM’s green hydrogen output is a good first step towards alleviating investor concerns about the return profile for clean energy megaprojects. Added to the position following recent weakness in the shares. We believe the competitive advantages are intact and valuation is attractive.”
Laurence Alexander, a Jefferies analyst, raised his price objective for Air Products from $295 to $364, indicating a buy recommendation. Mantle Ridge has amassed a more than $1 billion stake in Air Products and plans to push for improvements at the company, according to a report by Lauren Thomas of The Wall Street Journal on Friday. The firm argues that an activist takeover would allow Air Products to reframe its story as one of “quality growth” and, for a while at least, link shareholder returns to company initiatives rather than changes in policy or commodity prices. The analyst informs investors that a route to $364 per share, or 27% upside, is supported by pinning near-term prices to Linde on a sum-of-the-parts basis and the potential to unlock earnings.
The $30 billion capital allocation plan of Air Products is driven by business possibilities that position the company for rapid expansion.
Ken Griffin’s Citadel Investment Group is the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 309,026 shares worth $79.74 million as of Q2.
