We recently compiled a list of the 11 Best Small Cap Chemical Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Orion Engineered Carbons S.A. (NYSE:OEC) stands against the other best small cap chemical stocks to buy.
Chemical Industry: A Focus on Innovation and Sustainability
The chemical industry plays a crucial role in the global economy, contributing trillions of dollars to the world’s GDP. This sector is essential for producing a wide range of materials used in everyday products, from fertilizers and plastics to pharmaceuticals and construction materials.
Recent trends in the chemical industry indicate a strong focus on sustainability and innovation. Companies are increasingly investing in low-carbon technologies and circular economy practices, aiming to reduce greenhouse gas emissions and improve resource efficiency. According to a report by The Business Research Company, the green chemicals market was valued at $108.53 billion in 2023. The market is expected to grow at a compound annual growth rate (CAGR) of 10.4% during 2024-2028 to reach a value of $179.96 billion by the end of the forecast period.
The rise in demand for biodegradable materials and eco-friendly chemicals reflects shifting consumer preferences towards sustainability. This trend is driving companies to innovate and diversify their product offerings.
According to the IONICS report on Chemicals & Mining Industry Trends for 2025, biodegradable chemicals are set to gain widespread adoption in agriculture and consumer products over the next 4-6 years. This shift is largely fueled by advancements in technology and increased support from regulations, as more consumers seek sustainable alternatives. As a result, the market for these eco-friendly products is expected to grow significantly.
Government regulations promoting the use of green chemicals also play a crucial role, as they encourage industries to shift towards renewable resources and reduce reliance on non-renewable materials.
READ ALSO: 8 Best Fertilizer Stocks To Buy Now and 8 Best Plastics Stocks To Invest In Now.
Deloitte’s 2025 chemical industry outlook highlights that to remain competitive in a low-carbon economy, companies are focusing on innovation in three main areas: products, processes, and ecosystems. Many chemical firms are enhancing their product offerings to improve both performance and sustainability. Additionally, they are adopting process innovations, such as digital automation and process intensification, to make operations more efficient and environmentally friendly. For example, some companies are using AI-driven analytics to optimize production and reduce waste.
Ecosystem innovation is also becoming important as companies collaborate with other industry players, research institutions, and startups to develop sustainable solutions. This collaborative approach includes initiatives that aim to promote recycling and material reuse. To strengthen their market position, chemical companies are increasingly integrating these innovative strategies, combining capital investments in process improvements with research and development efforts for product enhancements.
A laboratory scientist in a lab coat examining a beaker of high purity carbon black.
Our Methodology
To compile our list of the 11 best small-cap chemical stocks to buy according to hedge funds, we used stock screeners from Finviz and Yahoo Finance. We also reviewed our own rankings and consulted various online resources to compile a list of the best small-cap chemical stocks. Please note that we defined small-cap stocks as those with a market capitalization between $300 million and $2 billion.
From an initial pool of more than 20 small-cap chemical stocks that met our criteria, we focused on the top 11 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds. The 11 best small-cap chemical stocks to buy are ranked in ascending order based on the number of hedge funds holding stakes in them.
Why do we care about what hedge funds do? 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).
Orion S.A. (NYSE:OEC)
Market Capitalization: $1.07 Billion
Number of Hedge Fund Holders: 23
Orion S.A. (NYSE:OEC) is a leading specialty chemicals company focused on producing carbon black, a vital material used in various applications such as tires, coatings, and batteries. Carbon black, which is a solid form of carbon produced as powder or pellets, is used to tint, colorize, increase durability, provide reinforcement, conduct electricity, and add UV protection. With 15 production plants worldwide and four innovation centers, Orion S.A. (NYSE:OEC) offers a diverse variety of production processes tailored to meet specific customer needs.
In April 2024, Orion S.A. (NYSE:OEC) broke ground on a new plant in La Porte, Texas, which will be the first facility in the US to produce acetylene-based conductive additives for lithium-ion batteries. This innovative plant will significantly reduce carbon emissions, boasting only one-tenth the carbon footprint of other commonly used materials. The facility is expected to start operations in the second quarter of 2025, positioning Orion S.A. (NYSE:OEC) as a key player in the growing electrification market.
In the third quarter of 2024, the company reported net sales of $463.4 million, slightly down from the previous year. Orion S.A. (NYSE:OEC) reported a net loss of $20.2 million, which included a $42.5 million impact from a significant asset misappropriation incident. Despite a loss due to the fraud event, Orion S.A. (NYSE:OEC) achieved an adjusted EBITDA of $80 million, marking a 7% improvement from the previous quarter and indicating strong operational resilience.
For the first nine months of 2024, the company’s net sales reached $1.44 billion, up by $17.6 million year-over-year. Although rubber segment volumes were down due to high tire imports into Western markets, Orion S.A. (NYSE:OEC) strategic focus on operational improvements and cost management is expected to drive future growth.
Overall, OEC ranks 4th among the 11 best small-cap chemical stocks to buy according to hedge funds. While we acknowledge the potential of chemical companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than OEC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
