10 Worst Specialty Chemical Stocks to Buy According to Short Sellers

5. Cabot Corporation (NYSE:CBT)

Number of Hedge Fund Holders: 22

Short % of Shares Outstanding: 4.48%

Cabot Corporation (NYSE:CBT), based in Boston, Massachusetts, is a global leader in specialty chemicals and performance materials. The company offers a diverse range of products, including reinforcing and specialty carbons, battery materials, engineered elastomer composites, inkjet colorants, masterbatches, conductive compounds, fumed metal oxides, and aerogel. It is one of the best chemical stocks to consider.

In Q3 2024, Cabot Corporation’s (NYSE:CBT) revenue increased by 5% to over $1 billion, compared to the previous quarter. The Performance Chemicals segment saw a 9% increase in sales, driven by strong demand in the automotive and semiconductor sectors. Meanwhile, the Reinforcement Materials segment experienced a 4% rise in sales volumes, despite weather-related disruptions in Mexico and Brazil.

Earnings also showed significant growth for the quarter, with adjusted EPS up 35% to $1.92, driven by a 72% EBIT increase in the Performance Chemicals segment and a 3% growth in the Reinforcement Materials segment due to higher pricing and a better product mix.

Liquidity remained strong in Q3, with $207 million in operating cash flow and $128 million in discretionary free cash flow. Cabot Corporation (NYSE:CBT) also maintained its liquidity at $1.4 billion and returned $73 million to shareholders through dividends and share buybacks.

On September 20, Cabot announced that the U.S. Department of Energy selected it for the award negotiation of up to $50 million. This funding will support the construction of a U.S.-based facility to produce battery-grade carbon nanotubes and conductive additive dispersions.

Cabot’s stock has risen by 5.74% over the past month and 32.00% YTD, driven by strong financial performance and solid liquidity. The company’s strategic investments in sustainability and cutting-edge technologies, such as battery-grade carbon nanotubes, have further boosted investor confidence in the company.

Cabot Corporation (NYSE:CBT)’s exposure to cyclical industries, particularly automotive and construction, makes it vulnerable to potential economic downturns in these sectors. This uncertainty has led to 4.48% of Cabot’s outstanding shares being sold short. Despite this, CBT is one of the best chemical stocks to consider.

Despite this, as of Q2 2024, 22 hedge funds, holding a combined investment of $92.4 million, remained bullish on the stock, according to Insider Monkey’s database.