Hedge Funds Are Warming Up To Westlake Chemical Partners LP (WLKP)

In this article we will take a look at whether hedge funds think Westlake Chemical Partners LP (NYSE:WLKP) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Westlake Chemical Partners LP (NYSE:WLKP) was in 3 hedge funds’ portfolios at the end of March. WLKP investors should be aware of an increase in hedge fund sentiment of late. There were 2 hedge funds in our database with WLKP holdings at the end of the previous quarter. Our calculations also showed that WLKP isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the latest hedge fund action regarding Westlake Chemical Partners LP (NYSE:WLKP).

What have hedge funds been doing with Westlake Chemical Partners LP (NYSE:WLKP)?

At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the fourth quarter of 2019. By comparison, 3 hedge funds held shares or bullish call options in WLKP a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

The largest stake in Westlake Chemical Partners LP (NYSE:WLKP) was held by Arrowstreet Capital, which reported holding $0.8 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $0.2 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.

As industrywide interest jumped, key money managers have jumped into Westlake Chemical Partners LP (NYSE:WLKP) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the biggest position in Westlake Chemical Partners LP (NYSE:WLKP). Arrowstreet Capital had $0.8 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.2 million investment in the stock during the quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Westlake Chemical Partners LP (NYSE:WLKP) but similarly valued. We will take a look at SpartanNash Company (NASDAQ:SPTN), ZIOPHARM Oncology Inc. (NASDAQ:ZIOP), TPI Composites, Inc. (NASDAQ:TPIC), and ARMOUR Residential REIT, Inc. (NYSE:ARR). All of these stocks’ market caps resemble WLKP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SPTN 14 29101 0
ZIOP 13 104502 -1
TPIC 13 47510 -7
ARR 10 15497 -1
Average 12.5 49153 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $1 million in WLKP’s case. SpartanNash Company (NASDAQ:SPTN) is the most popular stock in this table. On the other hand ARMOUR Residential REIT, Inc. (NYSE:ARR) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Westlake Chemical Partners LP (NYSE:WLKP) is even less popular than ARR. Hedge funds clearly dropped the ball on WLKP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. A small number of hedge funds were also right about betting on WLKP as the stock returned 23.2% so far in the second quarter and outperformed the market by an even larger margin.

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