5 Best Chemical Stocks To Buy Now

In this article, we discuss 5 best chemical stocks to buy now. If you want to see more stocks in this selection, check out 14 Best Chemical Stocks To Buy Now. 

5. Celanese Corporation (NYSE:CE)

Number of Hedge Fund Holders: 36

Celanese Corporation (NYSE:CE) is a Texas-based technology and specialty materials company that operates through three segments – Engineered Materials, Acetate Tow, and Acetyl Chain. The Acetyl Chain segment produces and supplies acetyl products, such as acetic acid, vinyl acetate monomers, acetic anhydride, and acetate esters, which are starting materials for colorants, paints, adhesives, coatings, and pharmaceuticals. The company also manufactures organic solvents and intermediates for pharmaceutical, agricultural, and chemical products. 

On November 10, Deutsche Bank analyst David Begleiter reiterated a Buy recommendation on Celanese Corporation (NYSE:CE) but trimmed the price target on the shares to $105 from $110 following the Q3 results. The analyst believes that an EPS of $13-$14 is achievable in 2023.

According to Insider Monkey’s Q3 data, 36 hedge funds were bullish on Celanese Corporation (NYSE:CE), and Warren Buffett’s Berkshire Hathaway held the leading position in the company, comprising 9.71 million shares worth $877.2 million.  

Here is what Vltava Fund has to say about Celanese Corporation (NYSE:CE) in its Q1 2022 investor letter:

“We then used the money freed up to, among other things, open three new positions. The stock price declines during the Russian invasion brought a lot of good prices to the market. Out of all the possibilities we considered, we picked the stocks of Celanese (CE).

Celanese is the world’s largest producer of acetic acid and its chemical derivatives, including vinyl acetate monomers and emulsions. Their applications are used in a wide range of industries, such as automotive tobacco, coatings, construction, energy, telecommunications, food, and medical. Celanese recently closed the acquisition of a large part of DuPont’s business, which will make Celanese an even bigger player in the industry while reducing the cyclicality of its business. The acquisition is quite large and should deliver significant value to shareholders that in our view is not at all presently reflected in the share price. Celanese is a business that stands more or less aside from the main interests of most investors, but it is a company with very high returns on capital, strong free cash flow, and historically very efficient resource allocation.”

4. Air Products and Chemicals, Inc. (NYSE:APD)

Number of Hedge Fund Holders: 43

Air Products and Chemicals, Inc. (NYSE:APD) is a Pennsylvania-based provider of atmospheric gasses, process and specialty gasses, and relevant equipment and services worldwide. The company serves multiple industries, including refining, chemical, gasification, metals, manufacturing, food and beverage, electronics, magnetic resonance imaging, and energy production and refining. Air Products and Chemicals, Inc. (NYSE:APD) is one of the premier chemical stocks to invest in. 

On November 3, Air Products and Chemicals, Inc. (NYSE:APD) issued guidance for FY 2023 adjusted earnings of $11.20-$11.50 per share, representing a growth of 9% to 12% over FY 2022, and Q1 adjusted EPS of $2.60-$2.80, which is 5%-13% higher than the prior-year quarter.

BofA analyst Steve Byrne on November 7 raised the price target on Air Products and Chemicals, Inc. (NYSE:APD) to $308 from $281 and kept a Neutral rating on the shares. Air Products and Chemicals, Inc. (NYSE:APD)’s EPS outperformed consensus estimates, and the company offered EPS guidance of $2.68-$2.88, mainly supported by higher volumes, pricing, and equity affiliate income counteracting increased costs and forex headwinds, the analyst told investors in a research note. The analyst said that mobility remains a primary long-term growth catalyst, and he forecasts low-teens earnings growth in FY23.

According to Insider Monkey’s third quarter database, 43 hedge funds were bullish on Air Products and Chemicals, Inc. (NYSE:APD), compared to 33 funds in the preceding quarter. Phill Gross and Robert Atchinson’s Adage Capital Management is a prominent position holder in the company, with 225,940 shares worth $52.5 million. 

Here is what Madison Funds specifically said about Air Products and Chemicals, Inc. (NYSE:APD) in its Q2 2022 investor letter:

“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 gasses 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…” (Click here to read full text)

3. Dow Inc. (NYSE:DOW)

Number of Hedge Fund Holders: 43

Dow Inc. (NYSE:DOW) is one of the best chemical stocks to invest in. The materials science company provides solutions for packaging, infrastructure, mobility, and consumer applications in the United States, Canada, Europe, the Middle East, Africa, India, the Asia Pacific, and Latin America. Dow Inc. (NYSE:DOW) operates through Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials & Coatings segments. It is one of the top chemical stocks to monitor. 

On October 13, Dow Inc. (NYSE:DOW) declared a $0.70 per share quarterly dividend, in line with previous. The dividend is distributable on December 9, to shareholders of the company as of November 30. The dividend yield on November 21 came in at 5.55%. 

Fermium Research analyst Frank Mitsch on October 21 maintained a Buy recommendation on Dow Inc. (NYSE:DOW) but lowered the price target on the shares to $50 from $60 after the company posted Q3 results that featured a 39% sequential decline in EBITDA. However, his “oft-cited thesis” for Dow is one for dividend yield and not short-term capital gain, which has not changed as he sees the safety of the dividend and a present yield of nearly 6%.

Among the hedge funds tracked by Insider Monkey, 43 funds reported owning stakes worth $709.8 million in Dow Inc. (NYSE:DOW) at the end of Q3 2022, compared to 45 funds in the prior quarter worth $871.5 million. Richard S. Pzena’s Pzena Investment Management is the largest stakeholder of the company, with 7.5 million shares valued at $330 million. 

2. DuPont de Nemours, Inc. (NYSE:DD)

Number of Hedge Fund Holders: 45

DuPont de Nemours, Inc. (NYSE:DD) is an American multinational chemical company and its product lines include Adhesives, Advanced Printing Solutions, Construction Materials, Consumer Products, Electronic Solutions, Fabrics, Fibers & Nonwovens, Industrial Films, Medical Devices & Materials, Packaging Materials & Solutions, Personal Protective Equipment, Solar/Photovoltaic Solutions, and Water Solutions. DuPont de Nemours, Inc. (NYSE:DD) is one of the best chemical stocks to monitor. 

On November 8, DuPont de Nemours, Inc. (NYSE:DD) reported Q3 non-GAAP earnings per share of $0.82 and a revenue of $3.30 billion, outperforming market estimates by $0.03 and $100 million, respectively. The company also announced an approval of $5.0 billion in share repurchase authorization.

RBC Capital analyst Arun Viswanathan on November 9 raised the price target on DuPont de Nemours, Inc. (NYSE:DD) to $76 from $64 and kept an Outperform rating on the shares following the Q3 earnings beat. DuPont de Nemours, Inc. (NYSE:DD)’s portfolio transformation is almost complete and its multiple can expand if the company can demonstrate stable demand or margins, less peak-to-trough earnings variability, and stickier price/cost in a recessionary backdrop, the analyst wrote in a research note.

According to Insider Monkey’s data, 45 hedge funds were long DuPont de Nemours, Inc. (NYSE:DD) at the end of Q3 2022, compared to 44 funds in the last quarter. 40 North Management held the biggest stake in the company, comprising 6.6 million shares worth $336.4 million. 

Here is what Rhizome Partners has to say about DuPont de Nemours, Inc. (NYSE:DD) in its Q1 2021 investor letter:

“We have written extensively about the anticipated DuPont’s Reverse Morris Trust merger with International Flavors and Fragrances (IFF) in January of 2021. During the quarter, DuPont shares traded up significantly in anticipation of the deal. We tendered about 40% of our DuPont shares for IFF and received about half of the allocation due to pro-ration. Investors are finally starting to appreciate DuPont’s effort to cut costs, streamline operations, and spin off companies into pure-play companies that trade at higher multiples. We are still getting used to the higher multiples that investors will pay for larger market cap and pure play companies such as DuPont.”

1. Albemarle Corporation (NYSE:ALB)

Number of Hedge Fund Holders: 49

Albemarle Corporation (NYSE:ALB) is a North Carolina-based company that develops, manufactures, and markets engineered specialty chemicals worldwide, operating through three segments – Lithium, Bromine, and Catalysts. It is one of the premier chemical stocks to buy now. On October 25, Albemarle Corporation (NYSE:ALB) declared a quarterly dividend of $0.395 per share, in line with previous. The dividend is payable on January 3, 2023 to shareholders of record on December 16. 

On November 8, RBC Capital analyst Arun Viswanathan raised the price target on Albemarle Corporation (NYSE:ALB) to $380 from $371 and kept an Outperform rating on the shares after its Q3 earnings beat. The analyst said that he remains favorable on the stock given a case of tight lithium supply and demand, although he also remains concerned about the potential for huge price swings in the lithium spot market.

According to Insider Monkey’s Q3 data, 49 hedge funds were long Albemarle Corporation (NYSE:ALB), compared to 39 funds in the last quarter. Israel Englander’s Millennium Management is the largest stakeholder of the company, with 603,396 shares worth $159.5 million. 

Carillon Tower Advisers made the following comment about Albemarle Corporation (NYSE:ALB) in its Q3 2022 investor letter:

“Albemarle Corporation (NYSE:ALB) is a global specialty chemicals company with leading positions in lithium, bromine, and refining catalysts. The company’s shares outperformed meaningfully in the quarter, driven largely by robust demand for lithium used to manufacture electric vehicle batteries. Albemarle is well-positioned for the accelerating adoption of electric vehicles and could benefit from the Inflation Reduction Act.”

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