Five Basic Materials Stocks Hedge Funds Love

#3 Dow Chemical Co (NYSE:DOW)

– Number of Hedge Fund Holders (as of December 31): 55
– Total Value of Hedge Fund Holdings (as of December 31): $4.54 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 7.10%

Laurence Alexander of Jefferies recently upgraded Dow Chemical to ‘Buy’ from ‘Hold’ and set a price target of $75, up from the previous $65. Alexander believes Dow Chemical’s pending merger with DuPont will close and that the synergies from the deal will unlock substantial upside. Of the 742 elite funds we track, 55 funds owned $4.54 billion of Dow Chemical Co (NYSE:DOW) and accounted for 7.10% of the float on December 31, versus 47 funds and $2.69 billion respectively on September 30.

#2 Air Products & Chemicals, Inc. (NYSE:APD)

– Number of Hedge Fund Holders (as of December 31): 57
– Total Value of Hedge Fund Holdings (as of December 31): $3.1 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 9.90%

57 elite funds reported owning stakes in Air Products & Chemicals, Inc. (NYSE:APD) at the end of Q4, up from 56 at the end of the third quarter. Besides smart money funds, Credit Suisse is a fan of the company, with analyst Christopher Parkinson setting a $151 price target on the stock. That’s up from the previous $145. Many bulls believe Air Product management’s capital allocation going forward will help drive shares higher over the long term.

#1 Monsanto Company (NYSE:MON)

– Number of Hedge Fund Holders (as of December 31): 73
– Total Value of Hedge Fund Holdings (as of December 31): $4.27 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 9.30%

With 73 elite funds holding positions at the end of 2016, Monsanto Company (NYSE:MON) is the smart money’s favorite basic materials stock on our list. In terms of Monsanto’s pending merger with Bayer, the two companies have begun the divestment process of assets of around $2.5 billion to win government approval around the globe. Given the perception among investors that the EU will approve a similar merger between Dow Chemical and DuPont, bulls hope that the Bayer/Monsanto combination will also get the thumbs up from the EU. If that happens and the U.S. government also approves, Monsanto stock could rally.

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