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Do Hedge Funds Love Westlake Chemical Corporation (WLK)?

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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 866 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 March 31st. In this article we look at what those investors think of Westlake Chemical Corporation (NYSE:WLK).

Is Westlake Chemical Corporation (NYSE:WLK) a healthy stock for your portfolio? The smart money was buying. The number of bullish hedge fund positions increased by 4 recently. Westlake Chemical Corporation (NYSE:WLK) was in 26 hedge funds' portfolios at the end of March. The all time high for this statistic is 35. Our calculations also showed that WLK isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 22 hedge funds in our database with WLK positions at the end of the fourth quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace
Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. 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 we're going to take a glance at the new hedge fund action regarding Westlake Chemical Corporation (NYSE:WLK).

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

Heading into the second quarter of 2021, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in WLK over the last 23 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Millennium Management, managed by Israel Englander, holds the most valuable position in Westlake Chemical Corporation (NYSE:WLK). Millennium Management has a $125.2 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $74.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions include Dmitry Balyasny's Balyasny Asset Management, Paul Marshall and Ian Wace's Marshall Wace LLP and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. In terms of the portfolio weights assigned to each position SIR Capital Management allocated the biggest weight to Westlake Chemical Corporation (NYSE:WLK), around 1.95% of its 13F portfolio. Appian Way Asset Management is also relatively very bullish on the stock, setting aside 1.87 percent of its 13F equity portfolio to WLK.

As industrywide interest jumped, key money managers were leading the bulls' herd. Sandler Capital Management, managed by Andrew Sandler, created the biggest position in Westlake Chemical Corporation (NYSE:WLK). Sandler Capital Management had $13.2 million invested in the company at the end of the quarter. Vince Maddi and Shawn Brennan's SIR Capital Management also made a $11.6 million investment in the stock during the quarter. The following funds were also among the new WLK investors: Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, John Overdeck and David Siegel's Two Sigma Advisors, and Bruce Kovner's Caxton Associates LP.

Let's check out hedge fund activity in other stocks similar to Westlake Chemical Corporation (NYSE:WLK). These stocks are Universal Health Services, Inc. (NYSE:UHS), Lamb Weston Holdings, Inc. (NYSE:LW), IPG Photonics Corporation (NASDAQ:IPGP), Bausch Health Companies Inc. (NYSE:BHC), Qiagen NV (NYSE:QGEN), Globe Life Inc. (NYSE:GL), and Bunge Limited (NYSE:BG). All of these stocks' market caps match WLK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UHS,43,882608,4 LW,38,493079,9 IPGP,31,416236,6 BHC,42,4076779,-1 QGEN,27,562548,3 GL,33,844018,2 BG,44,653455,-7 Average,36.9,1132675,2.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.9 hedge funds with bullish positions and the average amount invested in these stocks was $1133 million. That figure was $411 million in WLK's case. Bunge Limited (NYSE:BG) is the most popular stock in this table. On the other hand Qiagen NV (NYSE:QGEN) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Westlake Chemical Corporation (NYSE:WLK) is even less popular than QGEN. Our overall hedge fund sentiment score for WLK is 31.3. 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 dodged a bullet by taking a bearish stance towards WLK. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th but managed to beat the market again by 6.7 percentage points. Unfortunately WLK wasn't nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); WLK investors were disappointed as the stock returned 1.2% since the end of the first quarter (through 7/9) 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 most of these stocks already outperformed the market since 2019.

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