While no one can predict the future, some investors are able to achieve superior returns based on fundamental investment research. In an analysis of chemical manufacturing companies with at least $2 billion in market capitalization, three companies produced superior returns last year: Methanex Corp , Rockwood Holdings , and Minerals Technologies all have a 1-year price return over 40%. Let's see what gave these stocks such incredible growth in 2013, and whether or not that growth will continue into 2014.
Methanex Corporation -- No. 1
Mathenex, a producer and seller of methanol, has a 1-year return of 87%. With a market cap of $5.8 billion, the company has operations in Chile, Trinidad, Egypt, New Zealand, and Canada. The increase in earnings was primarily due to an increase in the market price of methanol from $425 to $438 per tonne. The company produced 1.035 million tonnes in the first nine months of 2013, and sold 1.04 million tonnes, which supports the increase in demand. According to an IHS Chemical study, the global market for methanol is driven by China, which increased consumption 23% from 2010 to 2012. With this kind of demand there's little doubt the company will continue to grow in 2014.
Rockwood Holdings -- No. 2
Rockwood Holdings, with a market cap of $5.3 billion, manufactures and markets specialty chemicals and other materials for both industrial and commercial use. The primary strength of this company is its diverse customer base -- there are many applications for what it produces, and it serves a wide range of end-users. As a result, the company grew its share price 43% in the last 52 weeks. Specifically, higher surface treatment volumes, higher automotive OEM, and higher lithium volumes contributed to the growth. Rockwood's growth potential lies in its ability to pull value out of its end-user base. .
Minerals Technologies -- No. 3
Minerals Technologies, recording sales of $1 billion, comes in with a 1-year market return of 42%. The company develops and produces specialty mineral products and support systems. Last quarter Mineral Technologies reported record operating income of $32.8 million, up 15% over 2012; EPS increased 17%. The company attributes increased sales of 3% to growth in specialty minerals, new satellite plants, and new satellite contracts. "We achieved record operating income of $32.8 million," said Robert S. Wetherbee, president and CEO. "This solid financial performance is a result of continued momentum with our two major growth initiatives-geographic expansion and new product development." Continued growth in 2014 will be dependent on the success of these growth initiatives.
Repeat performance in 2014?
Compared to sector averages, the chemical manufacturing industry is "on sale":
|Chemical Manufacturing||MEOH||ROC||MTX||Industry Avg||Sector Avg||S&P Avg|
|Market Capitalization||5.8 B||5.3 B||2.0 B||14.8 B||2.3 B||35.0 B|
|Return on Equity||-1.98%||3.12%||10.08%||15.16%||10.06%||14.45%|
The Foolish bottom line
The trend is your friend, and these three companies are the current contenders in the chemical manufacturing industry. Momentum from last year's success is a powerful thing for investors; it's also a motivating factor for executive leadership. Based on this analysis, there's no reason these three companies won't be able to repeat to post a repeat performance in 2014, but this Fool's pick is Methanex.
The Motley Fool's Stock of the Year
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.
The article The Top 3 Chemical Manufacturing Companies of 2013 originally appeared on Fool.com.Fool contributor C Bryant has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.