Innospec, Ingevity, FMC: Chemical Stocks Poised To Rebound

September 24th, 2020 by Trefis Team
FMC: FMC logo
FMC
FMC

The chemicals sector has underperformed significantly this year, as the Covid-19 pandemic caused industrial activity to plummet globally, impacting chemical demand. However, this might be a good time to enter the sector as valuations look attractive with demand also likely to pick up as economies open up post lockdowns. Our theme Chemical Stocks Seeing Growing Demand & Pricing Power which includes a group of chemical companies that are seeing higher demand, improving pricing power and profitability, and have a manageable amount of debt  – is down by about -28% year-to-date, as of 9/23/2020, versus the S&P 500 which is almost flat. Here is a bit more about these companies.

FMC Corp (FMC) is an agriculture chemical company focused on crop protection, plant health, and professional pest and turf management. The company has not really been impacted by the pandemic and has outperformed, rising by about 5.8% year-to-date. The stock trades at about 29x 2019 earnings.

FMC

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CF Industries (CF) is one of the world’s largest manufacturers and distributors of agricultural fertilizers. The stock is down by about -34% year-to-date. The stock trades at about 14x 2019 earnings.

Innospec (IOSP) is a specialty chemical company that sells fuel additives, performance chemicals, and oilfield chemicals. The stock is down by about -38% this year, due to its exposure to the oil market. The stock trades at about 14x 2019 earnings.

Ingevity Corporation (NGVT) sells specialty chemicals, high-performance carbon materials, and engineered polymers. The stock has underperformed significantly, falling -44% this year due to the company’s exposure to the automotive market, which has been impacted by the pandemic. The stock trades at about 11x 2019 earnings.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio to beat the market, with over 100% return since 2016, versus 50% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.

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