Here is What Hedge Funds Think About Westlake Chemical Partners LP (WLKP)

In this article we will check out the progression of hedge fund sentiment towards Westlake Chemical Partners LP (NYSE:WLKP) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Westlake Chemical Partners LP (NYSE:WLKP) shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. Westlake Chemical Partners LP (NYSE:WLKP) was in 3 hedge funds’ portfolios at the end of March. The all time high for this statistic is 5. There were 4 hedge funds in our database with WLKP holdings at the end of December. Our calculations also showed that WLKP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

John Zaro of Bourgeon Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a look at the recent hedge fund action regarding Westlake Chemical Partners LP (NYSE:WLKP).

Do Hedge Funds Think WLKP Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the fourth quarter of 2020. On the other hand, there were a total of 3 hedge funds with a bullish position in WLKP a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Arrowstreet Capital held the most valuable stake in Westlake Chemical Partners LP (NYSE:WLKP), which was worth $1.7 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $0.5 million worth of shares. Citadel Investment Group was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Bourgeon Capital allocated the biggest weight to Westlake Chemical Partners LP (NYSE:WLKP), around 0.06% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.0023 percent of its 13F equity portfolio to WLKP.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace LLP. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified WLKP as a viable investment and initiated a position in the stock.

Let’s now take a look at hedge fund activity in other stocks similar to Westlake Chemical Partners LP (NYSE:WLKP). We will take a look at Veru Inc. (NASDAQ:VERU), Par Pacific Holdings, Inc. (NYSE:PARR), Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL), Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), TCR2 Therapeutics Inc. (NASDAQ:TCRR), The Container Store Group Inc (NYSE:TCS), and OraSure Technologies, Inc. (NASDAQ:OSUR). This group of stocks’ market caps are similar to WLKP’s market cap.

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As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $165 million. That figure was $2 million in WLKP’s case. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) is the most popular stock in this table. On the other hand Veru Inc. (NASDAQ:VERU) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Westlake Chemical Partners LP (NYSE:WLKP) is even less popular than VERU. Our overall hedge fund sentiment score for WLKP is 22. 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. Hedge funds clearly dropped the ball on WLKP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on WLKP as the stock returned 14.4% since Q1 (through June 11th) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.