Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 13.5% in the fourth quarter. Seven out of 11 industry groups in the S&P 500 Index were down more than 20% from their 52-week highs at the trough of the stock market crash. The average return of a randomly picked stock in the index was even worse. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 15 most popular S&P 500 stocks among hedge funds not only recouped their Q4 losses but also outperformed the index by more than 3 percentage points. In this article, we will take a look at what hedge funds think about Westlake Chemical Corporation (NYSE:WLK).
Westlake Chemical Corporation (NYSE:WLK) was in 24 hedge funds’ portfolios at the end of the fourth quarter of 2018. WLK investors should pay attention to an increase in hedge fund interest in recent months. There were 19 hedge funds in our database with WLK positions at the end of the previous quarter. Our calculations also showed that WLK isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Glenn Russell Dubin of Highbridge Capital
We’re going to check out the fresh hedge fund action encompassing Westlake Chemical Corporation (NYSE:WLK).
What have hedge funds been doing with Westlake Chemical Corporation (NYSE:WLK)?
At Q4’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 26% from one quarter earlier. On the other hand, there were a total of 32 hedge funds with a bullish position in WLK a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Westlake Chemical Corporation (NYSE:WLK) was held by AQR Capital Management, which reported holding $114.7 million worth of stock at the end of September. It was followed by Millennium Management with a $55.2 million position. Other investors bullish on the company included Renaissance Technologies, Arrowstreet Capital, and Gotham Asset Management.
Consequently, specific money managers have jumped into Westlake Chemical Corporation (NYSE:WLK) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the largest position in Westlake Chemical Corporation (NYSE:WLK). Arrowstreet Capital had $25 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $6.6 million investment in the stock during the quarter. The other funds with brand new WLK positions are Till Bechtolsheimer’s Arosa Capital Management, Sara Nainzadeh’s Centenus Global Management, and Glenn Russell Dubin’s Highbridge Capital Management.
Let’s now review hedge fund activity in other stocks similar to Westlake Chemical Corporation (NYSE:WLK). We will take a look at DaVita Inc (NYSE:DVA), Goldcorp Inc. (NYSE:GG), Vail Resorts, Inc. (NYSE:MTN), and Huazhu Group Limited (NASDAQ:HTHT). All of these stocks’ market caps are similar to WLK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DVA | 39 | 3001787 | -3 |
| GG | 24 | 182700 | 6 |
| MTN | 26 | 544655 | -4 |
| HTHT | 15 | 147112 | 1 |
| Average | 26 | 969064 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $969 million. That figure was $312 million in WLK’s case. DaVita Inc (NYSE:DVA) is the most popular stock in this table. On the other hand Huazhu Group Limited (NASDAQ:HTHT) is the least popular one with only 15 bullish hedge fund positions. Westlake Chemical Corporation (NYSE:WLK) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately WLK wasn’t in this group. Hedge funds that bet on WLK were disappointed as the stock returned 4.9% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
