We recently compiled a list of the 10 Best Specialty Chemical Stocks To Buy Now. In this article, we are going to take a look at Hudson Technologies, Inc. (NASDAQ:HDSN) against the other specialty chemical stocks.
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.
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.
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)
A technician in a hazmat suit holding a refigerant canister inspecting the facility.
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.
Overall HDSN ranks 7th on our list of the best specialty chemical stocks to buy. While we acknowledge the potential of HDSN as an investment, 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 HDSN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
