Here is What Hedge Funds Think About Western Digital Corporation (WDC)

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Western Digital Corporation (NASDAQ:WDC), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Western Digital Corporation (NASDAQ:WDC) has experienced a decrease in support from the world’s most elite money managers of late. Western Digital Corporation (NASDAQ:WDC) was in 57 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 58. There were 58 hedge funds in our database with WDC holdings at the end of March. Our calculations also showed that WDC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to go over the new hedge fund action encompassing Western Digital Corporation (NASDAQ:WDC).

Do Hedge Funds Think WDC Is A Good Stock To Buy Now?

At Q2’s end, a total of 57 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards WDC over the last 24 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Point72 Asset Management, managed by Steve Cohen, holds the biggest position in Western Digital Corporation (NASDAQ:WDC). Point72 Asset Management has a $413.6 million position in the stock, comprising 1.9% of its 13F portfolio. On Point72 Asset Management’s heels is Lyrical Asset Management, led by Andrew Wellington and Jeff Keswin, holding a $307.8 million position; 3.7% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish include Israel Englander’s Millennium Management, and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Thunderbird Partners allocated the biggest weight to Western Digital Corporation (NASDAQ:WDC), around 11.54% of its 13F portfolio. Maple Rock Capital is also relatively very bullish on the stock, setting aside 10.98 percent of its 13F equity portfolio to WDC.

Seeing as Western Digital Corporation (NASDAQ:WDC) has witnessed a decline in interest from the smart money, logic holds that there exists a select few hedgies that slashed their full holdings by the end of the second quarter. It’s worth mentioning that Jerry Kochanski’s Shelter Haven Capital Management dumped the largest investment of all the hedgies watched by Insider Monkey, valued at about $46.6 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dumped about $26.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Western Digital Corporation (NASDAQ:WDC) but similarly valued. These stocks are Royal Caribbean Cruises Ltd. (NYSE:RCL), Dover Corporation (NYSE:DOV), Caesars Entertainment Inc. (NASDAQ:CZR), Xylem Inc (NYSE:XYL), Fox Corporation (NASDAQ:FOXA), PPL Corporation (NYSE:PPL), and 10x Genomics, Inc. (NASDAQ:TXG). This group of stocks’ market values are closest to WDC’s market value.

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As you can see these stocks had an average of 36.1 hedge funds with bullish positions and the average amount invested in these stocks was $911 million. That figure was $2114 million in WDC’s case. Caesars Entertainment Inc. (NASDAQ:CZR) is the most popular stock in this table. On the other hand Xylem Inc (NYSE:XYL) is the least popular one with only 23 bullish hedge fund positions. Western Digital Corporation (NASDAQ:WDC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WDC is 67.5. 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. 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 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 25.7% in 2021 through September 27th and beat the market again by 6.2 percentage points. Unfortunately WDC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on WDC were disappointed as the stock returned -17% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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