With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Workday Inc (NASDAQ:WDAY).
Is Workday Inc (NASDAQ:WDAY) a buy right now? Prominent investors are turning bullish. The number of bullish hedge fund positions moved up by 8 recently. Our calculations also showed that WDAY isn’t among the 30 most popular stocks among hedge funds (see the video below). WDAY was in 41 hedge funds’ portfolios at the end of June. There were 33 hedge funds in our database with WDAY positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 key hedge fund action encompassing Workday Inc (NASDAQ:WDAY).
How have hedgies been trading Workday Inc (NASDAQ:WDAY)?
At Q2’s end, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from one quarter earlier. On the other hand, there were a total of 31 hedge funds with a bullish position in WDAY a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, Bares Capital Management held the most valuable stake in Workday Inc (NASDAQ:WDAY), which was worth $377 million at the end of the second quarter. On the second spot was Matrix Capital Management which amassed $287.8 million worth of shares. Moreover, Alkeon Capital Management, Whale Rock Capital Management, and Duquesne Capital were also bullish on Workday Inc (NASDAQ:WDAY), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, key hedge funds have been driving this bullishness. Melvin Capital Management, managed by Gabriel Plotkin, initiated the biggest position in Workday Inc (NASDAQ:WDAY). Melvin Capital Management had $87.4 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also initiated a $14.9 million position during the quarter. The following funds were also among the new WDAY investors: Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, Dmitry Balyasny’s Balyasny Asset Management, and Marcelo Desio’s Lucha Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Workday Inc (NASDAQ:WDAY) but similarly valued. These stocks are The Progressive Corporation (NYSE:PGR), Brookfield Asset Management Inc. (NYSE:BAM), Raytheon Company (NYSE:RTN), and Las Vegas Sands Corp. (NYSE:LVS). This group of stocks’ market caps resemble WDAY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PGR | 50 | 1803182 | 6 |
| BAM | 22 | 806950 | -4 |
| RTN | 39 | 1609376 | -1 |
| LVS | 39 | 1882579 | 2 |
| Average | 37.5 | 1525522 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.5 hedge funds with bullish positions and the average amount invested in these stocks was $1526 million. That figure was $1470 million in WDAY’s case. The Progressive Corporation (NYSE:PGR) is the most popular stock in this table. On the other hand Brookfield Asset Management Inc. (NYSE:BAM) is the least popular one with only 22 bullish hedge fund positions. Workday Inc (NASDAQ:WDAY) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 WDAY wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WDAY were disappointed as the stock returned -17.3% 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.
