In this article, we will explore the 10 Best Specialty Chemical Stocks To Buy Now.
The chemical industry includes companies that produce industrial, specialty, and commodity chemicals, serving as a cornerstone of the modern world economy. In 2023, the global chemical industry stood at $5.1 trillion and is expected to grow to $7.8 trillion in 2028, with a whopping yearly growth rate of 8.7%, according to estimates by the Business Research Company.
Global Specialty Chemicals Market
Within the broader chemical industry, the specialty chemicals segment plays a crucial role. This segment includes performance chemicals used to improve industrial processes and as ingredients in final products to enhance technical and performance attributes. These chemicals include plastic & rubber additives, oilfield chemicals, water treatment chemicals, advanced ceramic chemicals, and several other types of performance chemicals.
In 2023, the global specialty chemicals market was valued at $627.7 billion and is expected to grow to $1 trillion by 2032 at a CAGR of 5%, according to Fortune Business Insights. This exceptional growth is driven by the packaging industry, particularly in food and cosmetic packaging, driven by the growth of e-commerce platforms.
In addition to packaging, the automotive industry boosts demand for specialty chemicals, which play a crucial role in producing parts like tires, coatings, and adhesives. Additionally, demand for specialty chemicals is strong in the construction industry where they help keep the structures safe and improve their lasting period.
The global food and beverage market is expected to grow from roughly $6.5 trillion in 2023 to $8.8 trillion by 2028, according to Fortune Business Insights. This means increasing demand for food additives and packaging which further bolsters growth prospects of the specialty chemicals industry.
Despite the wide usage of such chemicals, they are often subject to government regulations to protect workers, the environment, and customers. This is due to the specialty chemicals industry being the 3rd largest contributor to CO2 emissions from the industry.
However, the specialty chemicals industry has started evolving towards green and sustainable practices. This shift aims to lower energy emissions, improve safety standards, and lower compliance costs. Hydrogen fuel cells are expected to reduce the industry’s CO2 emissions, while Artificial Intelligence (AI) and machine learning (ML) can optimize processes, make materials discovery easier, and enhance predictive modeling.
Specialty Chemicals Market in USA
Based on their types and serving industries, the specialty chemicals market is divided into multiple segments including dyes, construction, pharmaceuticals, and others.
The U.S. specialty chemicals market is expected to grow at a CAGR of 3% mainly driven by the increased production of vehicles which directly increases the demand for paints, coatings, and additives. The U.S. automotive industry is one of the largest ones in the world; 15.5 million new light vehicles were sold in the country in 2023 alone, as we reported in our article about the 15 Fastest Growing Automotive Brands in the World.
The growing infrastructure of the U.S. is also a major consumer of specialty chemicals in the paint and coatings segment; the U.S. is the second biggest exporter of all types of paints.
With this, let’s now move on to our list of the 10 Best Specialty Chemical Stocks To Buy Now.
A technician performing quality checks on a range of specialty chemicals.
Our Methodology
To curate our list of the 10 Best Specialty Chemical Stocks To Buy Now, we gathered a list of all companies that are operating in this segment using the Finviz stock screener. We then further narrowed them down on the basis of several metrics like market capitalization, institutional ownership, the number of analysts watching the stock, and the overall financial health of respective stocks. We ranked the finest remaining companies by their upside potential, as predicted by the analysts. Finally, we ranked the top stocks based on the number of hedge funds that were bullish on the stock as of Q2 2024. Hedge Fund data was acquired from the Insider Monkey’s hedge fund database that tracks the activity of 920 hedge funds. For stocks with equal number of hedge fund holders, we used their upside as the tiebreaker.
Thus, let’s now look at the 10 Best Specialty Chemical Stocks To Buy Now.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. Koppers Holdings Inc. (NYSE:KOP)
Upside Potential: 63.09%
Number of Hedge Funds Holders: 14
Koppers Holdings Inc. (NYSE:KOP) deals in treated wood products, preservation chemicals, and carbon compounds. Headquartered in Pittsburgh, Pennsylvania, the company operates in performance chemicals, Railroad and utility products, and Carbon chemicals segments.
The company generated revenue of $2.15 billion in 2023, registering a growth of 8.77% on a year-to-year basis. This was due to Utility Products and Services segment generating record sales of $897.9 million (up by 13.9% YoY) and EBITDA of $84 million (up by 56.7% YoY). This improved performance of the segment was on the back of increased prices and higher volumes of crossties, which are wooden rectangular supports for rails on railway tracks.
The Performance Chemicals segment regained historical profitability as the increased raw materials cost provided leverage for price renegotiation. According to the American Bureau of Statistics, the producer price index in chemical manufacturing increased by 19.2% in three years.
Along with the price surge, the volume of specialty chemicals also increased by 6%, especially in America for copper-based preservatives. This resulted in an EBITDA of $29.4 million as compared to $17.6 million in the same quarter of the previous year.
The operating cash flows were reported to be $146.1 million in 2023 as compared to $102.3 million in the previous year. This shows stability and improvement in the company’s cash flows. All these factors contributed to the share price of the company as it hit a record high of $55 at the start of the second quarter of 2024.
Koppers Holdings Inc. (NYSE:KOP) recently opened its new utility pole peeling and drying facility in Louisiana in collaboration with the Leesville Parish Chamber of Commerce on a 105-acre site with an investment of $17 million. The project has helped the company to optimize its operational footprint.
According to James Sullivan (President and CEO of Koppers Holdings):
“It has allowed us to reduce costs with an improved logistics network and plant automation while opening new opportunities in the high-potential growth market as infrastructure investment in the US is only going to increase”
Along with the opening of the facility, the company also acquired Brown Wood preserving company in April 2024 which is expected to generate between $15 million and $25 million EBITDA for the company in 2025. Although the company has increased production facilities, the company has been charged with multiple violations of environmental safety regulations.
Given compliance with the regulations and adoption of safety standards, two analysts believe that the production and revenue of the company could drive the share price to achieve a target value of $57, thus indicating an upside of 61% – and also justifying its place on our list of the Top 10 Stocks in the Specialty Chemicals Industry to Buy.
9. Ingevity Corporation (NYSE:NGVT)
Upside Potential: 46.23%
Number of Hedge Funds Holders: 17
Next, we have Ingevity Corporation on our list of the 10 Best Specialty Chemical Stocks To Buy Now.
Ingevity Corporation (NYSE:NGVT) is involved in manufacturing and selling engineered polymers, carbon products, and specialty chemicals in multiple regions of the world including North America, Asia Pacific, South America, and the Middle East. The company operates through a Performance Material segment dealing with hardwood-based and activated carbon products, a Performance Chemical segment serving road and industrial technologies, and a Polymer Technologies segment involving specialty polymers.
The company’s financial health took a hit in the second quarter of 2024 as it reported revenue of $390.60 million which was 19% lower on a YoY basis. The primary reason for the decline was the Performance Chemical segment as it was repositioned, thus reducing exposure to certain markets.
However, it was offset by the strong performance of the company in the Performance Material segment due to improved pricing and volume which helped achieve a segment EBITDA of $82.2 million. Ingevity has announced additional measures to improve the profitability of the specialty chemicals segment by advancing the repositioning. For that purpose, the company has announced the consolidation of chemical refining with existing crude tall oil refining operations. This is expected to result in annual savings of $20 million to $25 million from 2025 onwards.
While Ingevity Corporation (NYSE:NGVT) faced challenges in one segment, the Advanced Polymer segment performed well for the company with increased volume. Thus, it delivered a segment EBITDA of 20.5% for the quarter.
The company plans to save $10 million annually from restructuring plans starting in 2025; given that the global specialty chemicals market is expected to grow (as discussed earlier), Ingevity’s prospects for improving its position and profitability in the industry increase.
The company reported a free cash flow of $11.6 million, signaling a strong cash position. Moreover, the company has projected the year-end revenue to be between $1.4 billion and $1.5 billion, powered by strong performance in Advanced Polymers and Performance Chemicals, and improvement in Specialty Chemicals.
Whether the company achieves its financial targets post-restructuring is something investors should carefully consider. Thus, given the factors discussed, five analysts have predicted an upside potential of 46% in the share price.
8. Ecovyst Inc. (NYSE:ECVT)
Upside Potential: 103.96%
Number of Hedge Funds Holders: 17
Ecovyst Inc. is the next stock on our list of the 10 Best Specialty Chemical Stocks To Buy Now.
Ecovyst Inc. (NYSE:ECVT) is an American company founded in 2017 that deals in two segments: Ecoservices and Advanced Catalysts. The Ecoservices segment deals with the recycling of sulfuric acid and is also involved in logistics for the production of alkylates for refineries. On the other hand, the Advanced Materials and Catalyst segments provide products and services to producers of polyethylene. It also deals with zeolite and its catalysts for low-emission engines, refineries, and sustainable fuels.
In May 2024, Ecovyst Inc. (NYSE:ECVT) announced the successful commissioning of its new thermal pyrolysis reactor and cutting-edge equipment, specially designed for the recycling of waste produced by plastic applications. The milestone is a big step in the company’s vision of addressing plastic pollution and promoting a healthier environment. This is a highly financially viable decision as the U.S. government has announced financial incentives of over $360 billion for companies making green investments.
The revenue of the company was $691.12 million in 2023, which is 15.73% lower on a YoY basis. The main reason for this decline was the pass-through effect of lower sulfur costs amounting to $86 million and the decline in volume. Sales volume was mainly reduced due to disruptions caused by the Elliot storm, lower demand, and decreased inventory in intermediaries dealing with polyethylene and sulfuric acid. Despite the fall in revenue, the diluted EPS of the company improved to $0.60 per share in 2023 from $0.52 in 2022, primarily due to an increase in prices for customers, which was partially offset by higher operating expenses.
The company reported sales of $160.5 million in the first quarter of 2024, primarily driven by higher sales in virgin sulfuric acid and regeneration services, although slightly offset by lower volumes being generated in Ecoservices and advanced silicas, which is a point of concern for the company.
Along with improved revenue, the cash generation was significant in the quarter which reduced the company’s net debt leverage to 2.9 times. Moreover, the company has recently announced its equity investment of $4.5 million in an innovative materials company – Pajarito Powder – specializing in electrolyzers and fuel cells.
In light of these developments, four analysts predict that the share has an upside potential of 104%, and 17 hedge funds are bullish on the stock.
7. Hudson Technologies, Inc. (NASDAQ:HDSN)
Upside Potential: 34.71%
Number of Hedge Funds Holders: 19
Next on our list of the 10 Best Specialty Chemical Stocks To Buy Now, we have Hudson Technologies, Inc. (NASDAQ:HDSN), which provides solutions to the problems occurring in the refrigerants industry, along with manufacturing specialty gases. Established in 1991 with headquarters in New Jersey, the company is engaged in the sale of refrigerants that enhance cooling efficiency of coolants, providing reclamation management services.
Serving a wide range of commercial, governmental, and industrial customers, the company also provides chiller chemistry and Smart Energy OPS for energy optimization, particularly in refrigeration and air conditioning.
Hudson Technologies, Inc. (NASDAQ:HDSN) registered revenue of $75.3 million for the quarter ended on June 30, 2024, an increase from $65.3 million in the first quarter of 2024. Although the refrigerants prices fell for the second quarter, this was slightly offset by an increase in the number of units sold, a 17% increase in units sold. The refrigerant prices fell by 25% in the first half year of 2024 on YoY basis, along with lower revenue from the company’s contracts and reduced carbon credit revenue, which resulted in $0.20 diluted earnings per share (EPS), compared to $0.41 in the same quarter of the previous year. This led to a downward trajectory in the share price , making a low of $7.50 on a year-to-date basis.
However, the company has strengthened its balance sheet by ending the period with no debt, ensuring financial stability and autonomy. The share price has also rebounded and is currently trading at $8.10, as of the time of writing. The company has also reported $30.5 million in cash, which the board of directors is planning to invest in the repurchase of common stock valued at up to $10 million.
In June 2024, the company also announced the acquisition of all assets of USA United Suppliers of America for $20.7 million, which has been the country’s leading refrigerant distributor and purchaser of recovered refrigerant for over 25 years. With the phase-down of virgin refrigerants, this acquisition has given direct access to reclaimed products, which will be significant for the company to maintain its strong position. The acquisition will enhance the sourcing ability of recovered refrigerants, which is a high margin segment for the company due to market supply challenges.
Despite the falling refrigerant prices, the company’s strong cash position and acquisitions mean that analysts predict the stock has an upside potential of 34.71% from the current price. Therefore, 19 hedge funds are bullish on the stock as of Q2 2024.
6. Arcadium Lithium plc (NYSE:ALTM)
Upside Potential: 107%
Number of Hedge Funds Holders: 19
Arcadium Lithium plc (NYSE:ALTM) is engaged in the production of lithium chemical products. It offers lithium oxide, lithium carbonate, and high purity lithium metal for pharmaceutical, battery, electronics, polymers, and aerospace applications.
The company has recently announced the acquisition of Li Metal’s Lithium metal business including a pilot production facility in Canada. This acquisition will help the company enhance its production capabilities and meet the demand for the next-generation battery materials. The acquisition is worth $11 million, paid entirely in cash.
In the second quarter of 2024, Arcadium Lithium plc (NYSE:ALTM) posted revenue of $255 million with a net income of $85.7 million. Total volumes increased in the second quarter due to higher sales of hydroxides and carbonates. However, spodumene registered declining sales on account of reduced production at Mt. Cattlin.
Although the average realized price for spodumene was higher sequentially, it was lower for the other products. The decline was primarily driven by lower prices of lithium chemicals, changes in customers and product mix, and lagging effect of market indices on volumes on hydroxide and carbonate volumes.
The company plans to achieve cost savings at the higher end of its $60 million to $80 million guidance range. Organizational restructuring, operational savings and elimination of third-party services have driven these savings.
Moreover, Arcadium Lithium plc (NYSE:ALTM) projects a 25% increase in combined lithium hydroxide and lithium carbonate volumes for the full year 2024, due to major expansions. In addition to the completed expansions, the company plans to reduce capital spending by $500 million over the next 24 months. This reduction comes from deferring investments in two of four expansion projects due to the surplus lithium supply from Indonesia and China.
Following the recently completed acquisition and strong financials, 19 hedge funds have invested a total of $51 million in the stock. Moreover, 11 analysts have forecasted an upside potential of 107% for the share price, placing it among the 10 Best Specialty Chemical Stocks To Buy Now.
5. American Vanguard Corporation (NYSE:AVD)
Upside Potential: 184%
Number of Hedge Funds Holders: 19
The next stock on our list of the 10 Best Specialty Chemical Stocks To Buy Now is American Vanguard Corporation (NYSE:AVD). It develops and markets specialty chemicals for use in the agriculture, commercial and consumer segments. The company also produces biological and chemical products for crop applications. Based in California, the company distributes its products with the help of national distribution companies and sales offices.
The company reported net sales of $128.2 million in the second quarter of 2024 which are slightly lower than the sales of $132.8 million of the second quarter in 2023. However, half-year sales of 2024 were higher with $263.4 million reported in the first half of 2024 compared to $257.7 million in the prior year. It recorded a double-digit sales increase in the non-crop and green solutions business. This increase was driven by stronger demand in Central America.
Although the sales registered a growth, the profitability of American Vanguard Corporation (NYSE:AVD) declined, as adjusted EBITDA of $6.2 million reported in second quarter of 2024 was lower than $10.7 million in the prior year. This decline was driven by one-time costs, including severance of the former CEO as well as restructuring costs.
Despite the one-time nature of these costs, the company announced immediate steps to improve liquidity and cost structure. It has also set in motion multiple initiatives to reduce inventory downward and maximize cash. Nevertheless, American Vanguard Corporation (NYSE:AVD) announced a cash dividend of $0.03, reflecting the financial strength of the company.
The company faced a challenging situation when it had to cancel all registrations for its Dacthal herbicide products following a suspension order from EPA (Environmental Protection Agency). Despite its reservations with the EPA decision, the company is prioritizing the removal of product from market.
Meanwhile, 19 hedge funds have collectively invested $43 million in the company’s stock. Additionally, three analysts have forecasted an upside potential of 184% in the share.
4. Ashland Inc. (NYSE:ASH)
Upside Potential: 20.64%
Number of Hedge Funds Holders: 25
Operating in the life sciences, personal care, intermediaries, and specialty additives sectors, Ashland Inc. (NYSE:ASH) serves both consumer and industrial segments. The company provides pharmaceutical solutions, nutrition solutions, biodegradable performance materials, and advanced materials that act as surfactants and modifiers.
Ashland Inc. (NYSE:ASH) posted a revenue of $575 million in the quarter ended on March 31, 2024. The company’s share price showed a consistent upward trend in the first half of 2024, rising from $83.7 at the start of the year to $101.3 in the second quarter of 2024, yielding a 20.9% return. Sales were boosted by an increase in volume of personal care and specialty additive segments reflecting an increase of 1.2% compared to the same quarter last year. However, sales in the life sciences segment were down by 7.5%, reflecting weaker demand for vinyl pyrrolidone and derivatives (VP&D), mainly used in pharma and crop-care markets.
Overall, the company reported an adjusted EBITDA of $126 million, down by 13% on a YoY basis due to pricing concerns. The company has a strong cash position on the balance sheet, with $439 million in cash available; however, the company has $1.3 billion in long-term debt, which investors should monitor closely.
Along with that, the company has signed an agreement on July 5, 2024 to sell its nutraceuticals business, which is expected to be completed in the third quarter of 2024, and is expected to help the company optimize its product mix.
The company has also repurchased $130 million in shares as part of a disciplined capital approach signaling the trust the company holds in its valuation. Despite this positive news, the weakening demand trend remains a concern for management, who are hopeful for improvement later in the year.
According to Guillermo Novo (Chair & CEO of Ashland):
“Although overall demand trends are improving, there is uncertainty around specific industry and regional dynamics. To be prudent, we are planning for a choppy demand environment”
Whether the demand improves later in the the year is something investors should keep an eye on. However, the company has emphasized its strategic decisions for long-term profitability, despite short-term demand disruptions. Considering these factors, the share price has an upside potential of 20.64%, with four analysts bullish on the stock. As such, 25 hedge funds are bullish on the stock, with investments totaling $540 million. Thus, the stock makes it to our list of the 10 Best Specialty Chemical Stocks To Buy Now.
3. Quaker Chemical Corporation (NYSE:KWR)
Upside Potential: 36.13%
Number of Hedge Funds Holders: 25
Quaker Chemical Corporation (NYSE:KWR) manufactures industrial fluids for steel, aluminum, and several other global companies. It produces specialty chemicals and provides management services for industrial and manufacturing applications.
The company registered a revenue of $463.6 million in the second quarter of 2024, which fell from $495.4 million in the same quarter of the last year. This was due to a decrease in selling price and sales volume, latter of which fell by 1%. Moreover, the revenue fell because of the weaker market conditions in the EMEA region, which was slightly offset by an improvement in the performance of the Asia/Pacific segment.
However, the company’s EBITDA of $84.3 million in the quarter was a 5% improvement compared to the revenue of the same quarter of the previous year. This was due to improved gross margins for all segments of the company.
Thus, the company translated these improved earnings on to shareholders, with the announcement of a $0.485 dividend, which was 7% higher than the previous dividend paid. This also marked the 15th consecutive annual dividend, reflecting the long-term stability of the company’s operations. In July 2024, it also announced the breaking ground of its new manufacturing facility in China which would increase the production capacity to support the growth of customers, particularly in the Asia-Pacific region, where the operating earnings increased in the second quarter of 2024.
Along with that, Quaker Chemical Corporation (NYSE:KWR) reported net operational cash flows of $73.5 million, which is a testament to the strong financial performance of the company. In light of these remarkable feats achieved by the company, the share price can show an increase of 36.13% from the current price, according to analysts.
2. Orion S.A. (NYSE:OEC)
Upside Potential: 52.14%
Number of Hedge Funds Holders: 30
Orion S.A. (NYSE:OEC) manufactures and sells carbon black products. The company operates through two segments: Rubber Carbon Black and Specialty Carbon Black. Orion serves printing, fiber, batteries, polymers, and coatings sectors.
Orion S.A. (NYSE:OEC) has registered revenue of $477 million in the second quarter of 2024, which is a 3.97% increase on a YoY basis. This was due to an increase in the volume of Specialty Carbon segments on the back of higher oil prices and enhanced price agreements. However, the gross profit of the company fell by $7.3 million, mainly on account of higher fixed costs, and declined co-generation efficiency.
However, the company is anticipating EBITDA of $315 million to $330 million by the end of the year, mainly based on a 17% volume increase in the Specialty Carbon Black segment, across multiple regions and markets. According to analysts, the specialty carbon black segment will increase at a CAGR of 7% because of the adoption of lithium-ion batteries, and increased demand in agriculture stretch wrap.
In addition to increased demand for its products, the company is focused on achieving sustainability goals as well. In the annual sustainability report published at the end of 2023, Orion announced the opening of a Battery innovation center for experimentation on Lithium-ion batteries, and eventually shifting to electrification. According to the White House, the Environmental Protection Organization introduced a fund of $27 billion in May 2024. This fund will act as a greenhouse reduction fund to enhance the investments in clean energy projects, which can directly benefit Orion S.A.
The company has also announced an interim dividend of $0.02 per share, which depicts the stronger financial position of the compay. In May 2024, the company also announced its investment to upgrade the alpha carbon facility, which will deal with 500,000 metric tons of discarded tires. Anticipating these investments, three analysts have anticipated that the share can show an upside of 52.14%. Moreover, 30 hedge funds are bullish on the stock as of Q2 2024, which is up by one hedge fund from Q1.
1. Albemarle Corporation (NYSE:ALB)
Upside Potential: 35%
Number of Hedge Funds Holders: 32
Albemarle Corporation develops, manufactures, and markets specialty chemicals. The company operates through three segments: Energy storage, Catalyst and Specialties.
The Energy Storage segment deals with storage of various lithium compounds like lithium carbonate, lithium chloride and lithium hydroxide. The company also provides technical service for handling and use of reactive lithium products.
On the other hand, the Specialties segment deals in bromine-based specialty chemicals, elemental bromine, alkyl, organic bromine, and other bromine fine chemicals. It also manufactures cesium products for chemical and pharmaceutical industries. Lastly, the catalyst segment offers clean fuel technologies.
Albemarle Corporation (NYSE:ALB) recorded sales revenue of $1.4 billion in second quarter of 2024. The sales stayed roughly the same over the two quarters of 2024; however, it fell from $2.4 billion in the prior-year quarter. This decline was primarily due to lower pricing in the Energy Storage sector.
Furthermore, the company registered an EBITDA of $386 million that saw a decline of $880 million from the prior-year quarter. This decline was on the account of lower margins and reduced equity earnings, due to falling prices of lithium. However, the adjusted EBITDA rose by 33% in the second quarter compared to the first quarter fueled by higher sales volumes across all businesses and higher income from Talison JV sales volumes.
Albemarle Corporation (NYSE:ALB) also reported operational cash flows of $363 million in the quarter. This was an increase of $289 million compared to the same quarter of the last year. Improvements in working capital and higher Talison JV drove this improvement in cash position. The company ended the second quarter with $3.5 billion liquidity, including $1.8 billion of cash and cash equivalents and $1.5 billion in the revolving facility.
Albemarle has unveiled its project plan for Kings Mountain Mine, which is one of the few known hard-rock lithium deposits in the U.S. The plan outlines the site footprint, primary features, and mining process details. Following approval and final investment decision, the mine is projected to produce 420,000 tons of lithium-bearing spodumene concentrate every year.
Given the strong financial situation reported along with the major breakthrough in lithium mining, 22 analysts have forecasted an upside of 35% in the share price. Additionally, 32 Hedge funds have invested $484 million in this share as well.
ALB is a specialty chemic stock with high upside potential. But our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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