In this article, we discuss 10 best chemical stocks to buy now. If you want to read about some more chemical stocks to buy now, go directly to 5 Best Chemical Stocks To Buy Now.
A strong demand for commodity and specialty chemicals has helped keep prices at record high levels in the chemicals sector over the past few months, boosting stocks in the sector like DuPont de Nemours Inc (NYSE:DD), Dow Inc. (NYSE:DOW), and LyondellBasell Industries N.V. (NYSE:LYB), and resulting in increased capital expenditures for building capacity. Chemical firms are also refocusing on growth in end-markets through organic and inorganic routes, per search firm Deloitte, but face margin pressures amid raw material cost inflation.
According to a report by Deloitte, chemical volumes in the United States are set to grow at a rate of 3% in 2022, doubling from the growth rate of 1.5% in 2021. Shipments are also forecast to rise during this period. The American Chemistry Council is also bullish on the sector, claiming in a recent research that after a 1.6% gain in chemical output in 2021, the output will grow by 4.1% in 2022 and expand 2.4% in 2023. Capital spending is also slated to jump 12.3% in 2022 to $34.5 billion, and 5.5% in 2023 to $36.4 billion.
Investors are thus pouring money into the sector to take advantage of these growth drivers. Venture capital firms raised $247 billion for the chemicals industry between January and May 2022, per the council. The industry is also facing the impact of a renewed push towards sustainability. Some of the changes that chemical firms are making in this regard include a focus on innovative design, creation, processing, use, and disposal of substances. Research and development spending in the space has increased as well.
Our Methodology
The companies that operate in the chemical sector were selected for the list through a careful assessment of business fundamentals and analyst ratings to provide readers with some context for their investment choices. Hedge fund sentiment was included as a classifier as well. The hedge fund sentiment around each stock was calculated using the data of around 900 hedge funds tracked by Insider Monkey in the second quarter of 2022.
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Best Chemical Stocks To Buy Now
10. Aemetis, Inc. (NASDAQ:AMTX)
Number of Hedge Fund Holders: 5
Aemetis, Inc. (NASDAQ:AMTX) operates as a renewable natural gas and renewable fuels company in North America and India. The firm features on the list of best chemical stocks to invest in. On September 7, the company announced that it had been awarded supply contracts that were worth $7 billion for sustainable aviation fuel and renewable diesel with ten airlines. The agreements cover 916 million gallons of blended SAF and come after a contract for 450 million gallons of RD with a major travel stop chain.
In mid-June, Credit Suisse analyst Manav Gupta maintained an Outperform rating on Aemetis, Inc. (NASDAQ:AMTX) stock and lowered the price target to $27 from $35, noting the firm was still targeting to bring a total of 10 dairies online by year-end.
At the end of the second quarter of 2022, 5 hedge funds in the database of Insider Monkey held stakes worth $12.6 million in Aemetis, Inc. (NASDAQ:AMTX), compared to 9 the preceding quarter worth $34.7 million.
Just like DuPont de Nemours Inc (NYSE:DD), Dow Inc. (NYSE:DOW), and LyondellBasell Industries N.V. (NYSE:LYB), Aemetis, Inc. (NASDAQ:AMTX) is one of the best chemical stocks to buy according to hedge funds.
9. Green Plains Inc. (NASDAQ:GPRE)
Number of Hedge Fund Holders: 22
Green Plains Inc. (NASDAQ:GPRE) produces, markets, and distributes ethanol in the United States and internationally. The company is one of the most prominent chemical stocks to invest in. On August 2, the firm posted earnings for the second quarter of 2022, reporting earnings per share of $0.73, beating estimates by $0.58. The revenue over the period was $1.1 billion, up over 39% compared to the revenue over the same period last year and beating analyst expectations by $80 million.
Green Plains Inc. (NASDAQ:GPRE) is based in Nebraska and was founded in 2004. Some of the products it sells include ethanol, distiller grains, and ultra-high protein and corn oil, as well as grain, natural gas, and other commodities in various markets.
At the end of the second quarter of 2022, 22 hedge funds in the database of Insider Monkey held stakes worth $172 million in Green Plains Inc. (NASDAQ:GPRE), compared to 20 in the previous quarter worth $252 million.
8. Tronox Holdings plc (NYSE:TROX)
Number of Hedge Fund Holders: 29
Tronox Holdings plc (NYSE:TROX) operates as a vertically integrated manufacturer of TiO2 pigment. The firm is among the best chemical stocks to invest in. Tronox Holdings plc (NYSE:TROX) is slowly building a dividend profile. Over the past nine years, it has consistently paid a dividend to shareholders. These payments have also registered growth in the past two years. On August 3, the firm declared a quarterly dividend of $0.125 per share, in line with previous. The forward yield was 3.22%.
On September 27, BMO Capital analyst John McNulty maintained a Market Perform rating on Tronox Holdings plc (NYSE:TROX) stock and lowered the price target to $15 from $16, noting the shares were arguably too undervalued but the macro environment was filled with risks.
Among the hedge funds being tracked by Insider Monkey, Toronto-based investment firm Maple Rock Capital is a leading shareholder in Tronox Holdings plc (NYSE:TROX), with 1.8 million shares worth more than $30 million.
7. Eastman Chemical Company (NYSE:EMN)
Number of Hedge Fund Holders: 29
Eastman Chemical Company (NYSE:EMN) operates as a specialty materials company in the United States and internationally. The firm is among the best chemical stocks to invest in. On September 20, Eastman Chemical Company (NYSE:EMN) announced that it had entered into a deal with Ethicon to provide the latter with medical-grade materials for medical device sterile-barrier packaging. Under the agreement, Ethicon would provide Eastman Chemical Company (NYSE:EMN) with Eastar Renew 6763 Copolyester, becoming the first health company to use medical-grade Eastman Renew materials in product packaging.
On September 19, UBS analyst Joshua Spector maintained a Buy rating on Eastman Chemical Company (NYSE:EMN) stock and lowered the price target to $108 from $118, noting that higher costs were heading up against weaker demand in the sector.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Two Sigma Advisors is a leading shareholder in Eastman Chemical Company (NYSE:EMN), with 657,800 shares worth more than $59 million.
6. Air Products and Chemicals, Inc. (NYSE:APD)
Number of Hedge Fund Holders: 33
Air Products and Chemicals, Inc. (NYSE:APD) provides atmospheric gasses, process and specialty gasses, equipment, and services worldwide. It is one of the top chemical stocks to invest in. On September 6, Air Products and Chemicals, Inc. (NYSE:APD) announced that it had signed a long term contract with Imperial Oil for the supply of low-carbon hydrogen for a proposed renewable diesel complex at the Strathcona refinery of the latter in Alberta. The former will provide pipeline supply from the hydrogen plant under construction in Alberta.
On August 15, BMO Capital analyst John McNulty upgraded Air Products and Chemicals, Inc. (NYSE:APD) stock to Outperform from Market Perform with a price target of $321, up from $283, noting the improved implementation of ambitions regarding energy inflation and cost management by the firm.
At the end of the second quarter of 2022, 33 hedge funds in the database of Insider Monkey held stakes worth $375 million in Air Products and Chemicals, Inc. (NYSE:APD), compared to 39 in the previous quarter worth $859 million.
Alongside DuPont de Nemours Inc (NYSE:DD), Dow Inc. (NYSE:DOW), and LyondellBasell Industries N.V. (NYSE:LYB), Air Products and Chemicals, Inc. (NYSE:APD) is one of the best chemical stocks to buy according to hedge funds.
In its Q1 2021 investor letter, Madison Asset Management, LLC, an asset management firm, highlighted a few stocks and Air Products and Chemicals, Inc. (NYSE:APD) was one of them. Here is what the fund said:
“This quarter we are highlighting Air Products and Chemicals, Inc. (NYSE:APD) as a relative yield example in the Materials sector. APD is a leading global industrial gas supply company and is the largest supplier of hydrogen and helium in the world. It has a sustainable competitive advantage due to long-term customer relationships and contracts, high customer switching costs, and the mission critical nature of its products. Industrial gases are a relatively small fraction of customers’ overall costs but are crucial to ensure uninterrupted production.
Our thesis on APD is that it appears well-positioned for consistent double-digit growth due to a large multi-year capital allocation plan, and the need for accelerating capital expenditures by its customers. It has a $25 billion backlog driven by traditional gas investments along with new growth opportunities like gasification, green hydrogen, and carbon capture. APD’s gasification technologies help improve energy efficiency and independence, which is a key focus for its customers. The company also has a strong management team with a record of expanding margins and exemplary capital allocation.
The fund purchased APD in June 2022 at $260. At the time of purchase, APD had a dividend yield of 2.6% and a relative dividend yield of 1.6x the S&P 500, which was near the high end of its historical range. The chart below shows the long-term dividend yield and relative dividend yield of the stock. The company has an A-rated balance sheet by Standard & Poor’s and is a Dividend Aristocrat that has raised its annual dividend 40 years in a row. Over the past five years, APD has increased its dividend an average of 11.5% per year. We expect similar dividend increases in the future which would help grow income and protect against the impact of inflation…(read more)
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Disclosure. None. 10 Best Chemical Stocks To Buy Now is originally published on Insider Monkey.
