Is Westlake Chemical Corporation (NYSE:WLK) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Westlake Chemical Corporation (NYSE:WLK) was in 34 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 35. WLK shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. There were 35 hedge funds in our database with WLK holdings at the end of June. Our calculations also showed that WLK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a peek at the recent hedge fund action encompassing Westlake Chemical Corporation (NYSE:WLK).
Do Hedge Funds Think WLK Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WLK over the last 25 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Westlake Chemical Corporation (NYSE:WLK) was held by Millennium Management, which reported holding $117.7 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $55.4 million position. Other investors bullish on the company included Balyasny Asset Management, AQR Capital Management, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Jade Capital Advisors allocated the biggest weight to Westlake Chemical Corporation (NYSE:WLK), around 4.26% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, earmarking 2 percent of its 13F equity portfolio to WLK.
Since Westlake Chemical Corporation (NYSE:WLK) has witnessed falling interest from the smart money, it’s easy to see that there were a few fund managers who sold off their entire stakes last quarter. Intriguingly, Donald Sussman’s Paloma Partners said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, comprising an estimated $6.5 million in stock, and Jinghua Yan’s TwinBeech Capital was right behind this move, as the fund cut about $1.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Westlake Chemical Corporation (NYSE:WLK). We will take a look at Host Hotels and Resorts Inc (NYSE:HST), Darling Ingredients Inc. (NYSE:DAR), Dropbox, Inc. (NASDAQ:DBX), Globant SA (NYSE:GLOB), Atmos Energy Corporation (NYSE:ATO), Bunge Limited (NYSE:BG), and Universal Health Services, Inc. (NYSE:UHS). This group of stocks’ market valuations are similar to WLK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HST | 16 | 178357 | -8 |
| DAR | 33 | 658844 | -8 |
| DBX | 41 | 967573 | 2 |
| GLOB | 21 | 601276 | -2 |
| ATO | 16 | 77442 | -2 |
| BG | 37 | 538805 | -3 |
| UHS | 43 | 751314 | 2 |
| Average | 29.6 | 539087 | -2.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $539 million. That figure was $456 million in WLK’s case. Universal Health Services, Inc. (NYSE:UHS) is the most popular stock in this table. On the other hand Host Hotels and Resorts Inc (NYSE:HST) is the least popular one with only 16 bullish hedge fund positions. Westlake Chemical Corporation (NYSE:WLK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WLK is 66.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately WLK wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on WLK were disappointed as the stock returned 2.3% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
