Should You Buy PetroLogistics LP (PDH)?

PetroLogistics LP (NYSE:PDH) was in 7 hedge funds’ portfolio at the end of the fourth quarter of 2012. PDH has seen an increase in hedge fund interest in recent months. There were 4 hedge funds in our database with PDH holdings at the end of the previous quarter.

In the financial world, there are a multitude of indicators market participants can use to analyze stocks. Some of the most useful are hedge fund and insider trading movement. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the top hedge fund managers can trounce the market by a healthy margin (see just how much).

Equally as important, positive insider trading activity is another way to break down the stock market universe. Obviously, there are a variety of stimuli for an executive to downsize shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Plenty of academic studies have demonstrated the valuable potential of this tactic if you understand what to do (learn more here).

With these “truths” under our belt, let’s take a look at the latest action surrounding PetroLogistics LP (NYSE:PDH).

How have hedgies been trading PetroLogistics LP (NYSE:PDH)?

Heading into 2013, a total of 7 of the hedge funds we track held long positions in this stock, a change of 75% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly.

Of the funds we track, York Capital Management, managed by James Dinan, holds the biggest position in PetroLogistics LP (NYSE:PDH). York Capital Management has a $224.2 million position in the stock, comprising 5.5% of its 13F portfolio. Coming in second is Robert Pitts of Steadfast Capital Management, with a $102.5 million position; 2.7% of its 13F portfolio is allocated to the stock. Other hedge funds with similar optimism include Israel Englander’s Catapult Capital Management, Jim Simons’s Renaissance Technologies and Israel Englander’s Millennium Management.

As aggregate interest increased, key money managers have been driving this bullishness. York Capital Management, managed by James Dinan, established the most valuable position in PetroLogistics LP (NYSE:PDH). York Capital Management had 224.2 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also initiated a $2.4 million position during the quarter. The other funds with brand new PDH positions are Israel Englander’s Millennium Management, Robert Joseph Caruso’s Select Equity Group, and Andrew R. Midler’s Savitr Capital.

What have insiders been doing with PetroLogistics LP (NYSE:PDH)?

Bullish insider trading is at its handiest when the company in question has seen transactions within the past six months. Over the last six-month time period, PetroLogistics LP (NYSE:PDH) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to PetroLogistics LP (NYSE:PDH). These stocks are Braskem SA (ADR) (NYSE:BAK), LSB Industries, Inc. (NYSE:LXU), Huntsman Corporation (NYSE:HUN), A. Schulman Inc (NASDAQ:SHLM), and Balchem Corporation (NASDAQ:BCPC). This group of stocks are the members of the chemicals – major diversified industry and their market caps match PDH’s market cap.