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Why Shares of Huntsman Corporation (HUN) Are Surging

Huntsman Corporation (NYSE:HUN) has surged 5% this afternoon, far out pacing the broader market indexes and its market peers, in part due to Chairman John Huntsman Sr’s comments to Bloomberg that the company was ‘seriously looking’ at a potential merger after spinning of its more volatile titanium dioxide segment. Huntsman Sr. said, ‘We are looking seriously at the possibility of doing a merger or doing something that would double or triple our revenue’. Given that mergers can unlock substantial synergies due to company overlap, traders have bid Huntsman Corporation (NYSE:HUN) shares up today in the expectation that the company’s margins might improve if potential M&A occurs.

Sentiment in Huntsman Corporation (NYSE:HUN) has also been bullish due to the company guiding for first quarter 2017 adjusted EBITDA to be above the $274 million of adjusted EBITDA Huntsman realized in the first quarter of 2016. Although the stock has surged over the last four quarters, Huntsman Corporation (NYSE:HUN) still yields a reasonable 2.18% dividend yield and trades for 10.6 times forward earnings estimates.

What Does The Smart Money Sentiment Say?

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).

Elite fund sentiment in Huntsman Corporation (NYSE:HUN) has been rather stable. Of the 742 elite funds we track, 40 funds owned $662.25 million of Huntsman Corporation (NYSE:HUN) and accounted for 14.60% of the float on December 31, versus 42 funds and $563.48 million respectively on September 30.

The Bottom Line

Huntsman Corporation (NYSE:HUN) shares rallied due to the news that management is considering M&A that could unlock value for shareholders. The rally in the chemicals producer today furthers the solid performance the company has delivered to shareholders. Shares of Huntsman are currently up over 20% year-to-date and over 82% over the last four quarters.

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