At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Workday Inc (NASDAQ:WDAY).
Workday Inc (NASDAQ:WDAY) has seen an increase in enthusiasm from smart money recently. WDAY was in 58 hedge funds’ portfolios at the end of March. There were 55 hedge funds in our database with WDAY positions at the end of the previous quarter. Our calculations also showed that WDAY 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.
In the financial world there are a multitude of formulas shareholders use to value their holdings. A pair of the less known formulas are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the best fund managers can beat the S&P 500 by a significant margin (see the details here).
David Blood of Generation Investment Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. Also, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the latest hedge fund action surrounding Workday Inc (NASDAQ:WDAY).
What have hedge funds been doing with Workday Inc (NASDAQ:WDAY)?
At the end of the first quarter, a total of 58 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. By comparison, 33 hedge funds held shares or bullish call options in WDAY a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Workday Inc (NASDAQ:WDAY) was held by Bares Capital Management, which reported holding $394.8 million worth of stock at the end of September. It was followed by Viking Global with a $320.6 million position. Other investors bullish on the company included Tiger Global Management LLC, Duquesne Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Bares Capital Management allocated the biggest weight to Workday Inc (NASDAQ:WDAY), around 14.23% of its 13F portfolio. Half Sky Capital is also relatively very bullish on the stock, earmarking 11.46 percent of its 13F equity portfolio to WDAY.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Viking Global, managed by Andreas Halvorsen, assembled the biggest position in Workday Inc (NASDAQ:WDAY). Viking Global had $320.6 million invested in the company at the end of the quarter. David Blood and Al Gore’s Generation Investment Management also initiated a $147.7 million position during the quarter. The other funds with new positions in the stock are Michael Pausic’s Foxhaven Asset Management, Dmitry Balyasny’s Balyasny Asset Management, and Dennis Puri and Oliver Keller’s Hunt Lane Capital.
Let’s now review hedge fund activity in other stocks similar to Workday Inc (NASDAQ:WDAY). These stocks are Canadian Pacific Railway Limited (NYSE:CP), The Bank of New York Mellon Corporation (NYSE:BK), Mizuho Financial Group Inc. (NYSE:MFG), and Dell Technologies Inc. (NYSE:DELL). All of these stocks’ market caps resemble WDAY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CP | 32 | 1568644 | 3 |
| BK | 52 | 4401625 | -6 |
| MFG | 6 | 23691 | 1 |
| DELL | 39 | 1967686 | -2 |
| Average | 32.25 | 1990412 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $1990 million. That figure was $2260 million in WDAY’s case. The Bank of New York Mellon Corporation (NYSE:BK) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (NYSE:MFG) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Workday Inc (NASDAQ:WDAY) is more popular among hedge funds. 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 returned 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on WDAY as the stock returned 29.1% so far in Q2 (through May 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
