The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Westlake Chemical Corporation (NYSE:WLK) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Westlake Chemical Corporation (NYSE:WLK) was in 29 hedge funds’ portfolios at the end of June. The all time high for this statistics is 35. WLK has seen an increase in enthusiasm from smart money of late. There were 20 hedge funds in our database with WLK holdings at the end of March. Our calculations also showed that WLK isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ray Dalio of Bridgewater Associates
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s view the latest hedge fund action surrounding Westlake Chemical Corporation (NYSE:WLK).
What does smart money think about Westlake Chemical Corporation (NYSE:WLK)?
At Q2’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 45% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WLK over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the most valuable position in Westlake Chemical Corporation (NYSE:WLK). Adage Capital Management has a $45.3 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Millennium Management, led by Israel Englander, holding a $31.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Griffin’s Citadel Investment Group and Eric Sprott’s Sprott Asset Management. In terms of the portfolio weights assigned to each position MFP Investors allocated the biggest weight to Westlake Chemical Corporation (NYSE:WLK), around 0.78% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, earmarking 0.57 percent of its 13F equity portfolio to WLK.
As aggregate interest increased, key money managers have jumped into Westlake Chemical Corporation (NYSE:WLK) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most outsized position in Westlake Chemical Corporation (NYSE:WLK). Marshall Wace LLP had $5 million invested in the company at the end of the quarter. Alexander Mitchell’s Scopus Asset Management also initiated a $2.7 million position during the quarter. The other funds with new positions in the stock are Ray Dalio’s Bridgewater Associates, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Donald Sussman’s Paloma Partners.
Let’s now review hedge fund activity in other stocks similar to Westlake Chemical Corporation (NYSE:WLK). We will take a look at Cabot Oil & Gas Corporation (NYSE:COG), Algonquin Power & Utilities Corp. (NYSE:AQN), Watsco Inc (NYSE:WSO), Hubbell Incorporated (NYSE:HUBB), Kilroy Realty Corp (NYSE:KRC), Omega Healthcare Investors Inc (NYSE:OHI), and OneConnect Financial Technology Co., Ltd. (NYSE:OCFT). This group of stocks’ market caps match WLK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COG | 31 | 237488 | -6 |
| AQN | 13 | 283894 | -1 |
| WSO | 21 | 229597 | 1 |
| HUBB | 29 | 335298 | 14 |
| KRC | 20 | 411400 | 0 |
| OHI | 23 | 107776 | 6 |
| OCFT | 5 | 8062 | 2 |
| Average | 20.3 | 230502 | 2.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.3 hedge funds with bullish positions and the average amount invested in these stocks was $231 million. That figure was $165 million in WLK’s case. Cabot Oil & Gas Corporation (NYSE:COG) is the most popular stock in this table. On the other hand OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) is the least popular one with only 5 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 81. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Hedge funds were also right about betting on WLK as the stock returned 25% during Q3 (through September 14th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
