We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Workday Inc (NYSE:WDAY) and determine whether hedge funds skillfully traded this stock.
Hedge fund interest in Workday Inc (NYSE:WDAY) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that WDAY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Boston Scientific Corporation (NYSE:BSX), Activision Blizzard, Inc. (NASDAQ:ATVI), and Stellantis N.V. (NYSE:STLA) to gather more data points.
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind we’re going to take a gander at the key hedge fund action surrounding Workday Inc (NYSE:WDAY).
Do Hedge Funds Think WDAY Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 72 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WDAY over the last 25 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Lone Pine Capital has the largest position in Workday Inc (NYSE:WDAY), worth close to $1.2429 billion, amounting to 4.2% of its total 13F portfolio. The second most bullish fund manager is Tiger Global Management LLC, led by Chase Coleman, holding a $1.0542 billion position; the fund has 2% of its 13F portfolio invested in the stock. Remaining peers that hold long positions encompass Brian Bares’s Bares Capital Management, Jimmy Levin’s Sculptor Capital and Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management. In terms of the portfolio weights assigned to each position North Peak Capital allocated the biggest weight to Workday Inc (NYSE:WDAY), around 17.4% of its 13F portfolio. Fernbridge Capital Management is also relatively very bullish on the stock, dishing out 14.1 percent of its 13F equity portfolio to WDAY.
Seeing as Workday Inc (NYSE:WDAY) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of fund managers that decided to sell off their positions entirely last quarter. Intriguingly, Jimmy Levin’s Sculptor Capital cut the largest investment of the 750 funds followed by Insider Monkey, worth an estimated $271.4 million in stock, and Alex Sacerdote’s Whale Rock Capital Management was right behind this move, as the fund sold off about $216.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Workday Inc (NYSE:WDAY) but similarly valued. These stocks are Boston Scientific Corporation (NYSE:BSX), Activision Blizzard, Inc. (NASDAQ:ATVI), Stellantis N.V. (NYSE:STLA), Ecolab Inc. (NYSE:ECL), Eaton Corporation plc (NYSE:ETN), Norfolk Southern Corp. (NYSE:NSC), and Dominion Energy Inc. (NYSE:D). All of these stocks’ market caps match WDAY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BSX | 47 | 3051321 | -4 |
| ATVI | 80 | 4284643 | 2 |
| STLA | 24 | 1178890 | -4 |
| ECL | 39 | 2551887 | -9 |
| ETN | 45 | 1089775 | 5 |
| NSC | 46 | 1049404 | -12 |
| D | 27 | 545194 | -7 |
| Average | 44 | 1964445 | -4.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks was $1964 million. That figure was $6390 million in WDAY’s case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand Stellantis N.V. (NYSE:STLA) is the least popular one with only 24 bullish hedge fund positions. Workday Inc (NYSE:WDAY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WDAY is 74.9. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on WDAY as the stock returned 1.2% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.
Follow Workday Inc. (NYSE:WDAY)
Follow Workday Inc. (NYSE:WDAY)
Suggested Articles:
Disclosure: None. This article was originally published at Insider Monkey.
