Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Westlake Chemical Corporation (NYSE:WLK).
Westlake Chemical Corporation (NYSE:WLK) investors should pay attention to a decrease in enthusiasm from smart money in recent months. Our calculations also showed that WLK isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are a multitude of metrics investors have at their disposal to assess their holdings. A couple of the most useful metrics are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the elite money managers can outperform the broader indices by a healthy amount (see the details here).
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to review the new hedge fund action regarding Westlake Chemical Corporation (NYSE:WLK).
What does smart money think about Westlake Chemical Corporation (NYSE:WLK)?
Heading into the third quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in WLK a year ago. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Maverick Capital, managed by Lee Ainslie, holds the most valuable position in Westlake Chemical Corporation (NYSE:WLK). Maverick Capital has a $88.9 million position in the stock, comprising 1.3% of its 13F portfolio. Sitting at the No. 2 spot is Phill Gross and Robert Atchinson of Adage Capital Management, with a $83.7 million position; 0.2% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish comprise Dmitry Balyasny's Balyasny Asset Management, Israel Englander's Millennium Management and Eric Sprott's Sprott Asset Management.
Due to the fact that Westlake Chemical Corporation (NYSE:WLK) has experienced falling interest from the aggregate hedge fund industry, we can see that there were a few funds that elected to cut their positions entirely heading into Q3. At the top of the heap, Brandon Haley's Holocene Advisors dropped the biggest investment of the "upper crust" of funds monitored by Insider Monkey, comprising about $59 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund sold off about $29.8 million worth. These transactions are interesting, as total hedge fund interest dropped by 3 funds heading into Q3.
Let's also examine hedge fund activity in other stocks similar to Westlake Chemical Corporation (NYSE:WLK). We will take a look at SEI Investments Company (NASDAQ:SEIC), Formula One Group (NASDAQ:FWONK), Service Corporation International (NYSE:SCI), and Amdocs Limited (NASDAQ:DOX). All of these stocks' market caps resemble WLK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SEIC,22,396971,-2 FWONK,32,1760806,-3 SCI,15,424862,-5 DOX,25,678426,-1 Average,23.5,815266,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $815 million. That figure was $314 million in WLK's case. Formula One Group (NASDAQ:FWONK) is the most popular stock in this table. On the other hand Service Corporation International (NYSE:SCI) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately WLK wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WLK investors were disappointed as the stock returned -5.2% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.