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 Perimeter Solutions Inc. (NYSE:PRM) 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 close-up of a firefighter in full gear, monitoring a fire safety drill.
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).
Perimeter Solutions Inc. (NYSE:PRM)
Market Capitalization: $1.89 Billion
Number of Hedge Fund Holders: 25
Perimeter Solutions Inc. (NYSE:PRM) is a prominent global manufacturer of firefighting chemicals and lubricant additives. The company operates primarily in two segments: Fire Safety and Specialty Products. The Fire Safety segment formulates and produces fire management products, including retardants and foams, to tackle various fire types. Meanwhile, the Specialty Products segment focuses on producing Phosphorus Pentasulfide (P2S5), essential for high-quality lubricant additives that enhance engine performance.
In the third quarter of 2024, Perimeter Solutions Inc. (NYSE:PRM) reported impressive financial results, with net sales soaring by 102% to $288.4 million, compared to $142.7 million in the same quarter last year. Adjusted EBITDA also increased significantly by 177%, reaching $170.4 million from $61.5 million previously. This robust growth indicates strong demand for their products and effective operational strategies.
In November 2024, Perimeter Solutions Inc. (NYSE:PRM) completed its re-domiciliation from Luxembourg to Delaware, a strategic move aimed at aligning its legal structure with its US operations, which are responsible for the majority of the company’s revenue and EBITDA. This transition is expected to simplify regulatory processes and improve tax efficiency.
Perimeter Solutions Inc. (NYSE:PRM) maintains a solid liquidity position with approximately $223.1 million in cash and equivalents by the end of Q3 2024. The company has prioritized reinvestment into its operations, including increased capital expenditures for research and development and field services, which positions it well for future growth. With a strong market presence and strategic initiatives in place, Perimeter Solutions Inc. (NYSE:PRM) appears to be a compelling investment opportunity in the specialty chemicals sector.
PRM ranks among the best chemical stocks. According to Insider Monkey’s database, Perimeter Solutions Inc. (NYSE:PRM) was held by 25 hedge funds in Q3 2024, up from 20 in the previous quarter. Weitz Investment Management stated the following regarding Perimeter Solutions Inc. (NYSE:PRM) in its “Multi-Cap Equity Fund” third-quarter 2024 investor letter:
“The absolute performance news was also good this quarter. Gains were broad based: just over half of our companies experienced double-digit gains and there were few material detractors from quarterly performance. The Fund’s top performer for the quarter was Perimeter Solutions Inc. (NYSE:PRM), the leading provider of wildfire retardants. An increased level of wildfire activity has generated strong demand and generated better than expected cash flows. With its much-improved balance sheet, Perimeter’s management is more credibly in position to evaluate additional investment opportunities. Given the breadth of strength, portfolio activity skewed toward trims in the third quarter. Last year, we added assertively to our holdings of Perimeter Solutions as the stock declined. At that time, Perimeter was experiencing weaker than expected results due to a below average wildfire season. This year, the opposite has been true, and we have taken profits as shares have rallied.”
Overall, PRM ranks 1st 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 PRM 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.