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Westlake Chemical Corporation (NYSE:WLK): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

Westlake Chemical Corporation (NYSE:WLK) was in 21 hedge funds’ portfolio at the end of the fourth quarter of 2012. WLK investors should be aware of an increase in hedge fund interest in recent months. There were 20 hedge funds in our database with WLK holdings at the end of the previous quarter.

Westlake Chemical Corporation

In the eyes of most market participants, hedge funds are perceived as underperforming, old financial vehicles of yesteryear. While there are over 8000 funds in operation at present, we at Insider Monkey look at the crème de la crème of this group, about 450 funds. Most estimates calculate that this group controls most of the hedge fund industry’s total asset base, and by paying attention to their highest performing equity investments, we have spotted a few investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).

Just as key, bullish insider trading activity is a second way to parse down the stock market universe. Obviously, there are many stimuli for a bullish insider to sell shares of his or her company, but only one, very simple reason why they would initiate a purchase. Many empirical studies have demonstrated the market-beating potential of this method if “monkeys” understand where to look (learn more here).

Keeping this in mind, let’s take a glance at the recent action surrounding Westlake Chemical Corporation (NYSE:WLK).

Hedge fund activity in Westlake Chemical Corporation (NYSE:WLK)

In preparation for this year, a total of 21 of the hedge funds we track held long positions in this stock, a change of 5% from the third quarter. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly.

Of the funds we track, Chuck Royce’s Royce & Associates had the largest position in Westlake Chemical Corporation (NYSE:WLK), worth close to $317 million, accounting for 1% of its total 13F portfolio. Coming in second is Point State Capital, managed by Sean Cullinan, which held a $120 million position; 0.7% of its 13F portfolio is allocated to the stock. Some other hedge funds that hold long positions include Jeffrey Vinik’s Vinik Asset Management, Glenn Russell Dubin’s Highbridge Capital Management and Robert Joseph Caruso’s Select Equity Group.

As aggregate interest increased, key hedge funds were breaking ground themselves. Highbridge Capital Management, managed by Glenn Russell Dubin, created the most outsized position in Westlake Chemical Corporation (NYSE:WLK). Highbridge Capital Management had 42 million invested in the company at the end of the quarter. John Burbank’s Passport Capital also initiated a $31 million position during the quarter. The other funds with brand new WLK positions are Steven Cohen’s SAC Capital Advisors, SAC Subsidiary’s CR Intrinsic Investors, and D. E. Shaw’s D E Shaw.

How have insiders been trading Westlake Chemical Corporation (NYSE:WLK)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company in question has seen transactions within the past half-year. Over the latest half-year time frame, Westlake Chemical Corporation (NYSE:WLK) has seen zero unique insiders buying, and 11 insider sales (see the details of insider trades here).

With the returns demonstrated by the aforementioned time-tested strategies, retail investors should always keep an eye on hedge fund and insider trading activity, and Westlake Chemical Corporation (NYSE:WLK) is an important part of this process.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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