A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Western Digital Corporation (NASDAQ:WDC).
Is WDC a good stock to buy now? Western Digital Corporation (NASDAQ:WDC) investors should be aware of a decrease in support from the world’s most elite money managers recently. Western Digital Corporation (NASDAQ:WDC) was in 39 hedge funds’ portfolios at the end of September. The all time high for this statistic is 56. Our calculations also showed that WDC isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. With all of this in mind let’s analyze the recent hedge fund action encompassing Western Digital Corporation (NASDAQ:WDC).
Do Hedge Funds Think WDC Is A Good Stock To Buy Now?
At third quarter’s end, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the second quarter of 2020. By comparison, 40 hedge funds held shares or bullish call options in WDC a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, Lyrical Asset Management held the most valuable stake in Western Digital Corporation (NASDAQ:WDC), which was worth $153.9 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $134.3 million worth of shares. Citadel Investment Group, Thunderbird Partners, and Maple Rock Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Thunderbird Partners allocated the biggest weight to Western Digital Corporation (NASDAQ:WDC), around 8.17% of its 13F portfolio. Tegean Capital Management is also relatively very bullish on the stock, setting aside 7.24 percent of its 13F equity portfolio to WDC.
Because Western Digital Corporation (NASDAQ:WDC) has faced falling interest from the entirety of the hedge funds we track, it’s safe to say that there were a few hedge funds that decided to sell off their entire stakes in the third quarter. It’s worth mentioning that David Cohen and Harold Levy’s Iridian Asset Management dropped the biggest stake of all the hedgies watched by Insider Monkey, worth an estimated $34.5 million in stock, and Kevin Cottrell and Chris LaSusa’s KCL Capital was right behind this move, as the fund sold off about $18.8 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 10 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Western Digital Corporation (NASDAQ:WDC). We will take a look at Principal Financial Group Inc (NYSE:PFG), Discovery Inc. (NASDAQ:DISCA), Sarepta Therapeutics Inc (NASDAQ:SRPT), Suzano S.A. (NYSE:SUZ), Erie Indemnity Company (NASDAQ:ERIE), Icahn Enterprises LP (NASDAQ:IEP), and AngloGold Ashanti Limited (NYSE:AU). All of these stocks’ market caps resemble WDC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PFG | 25 | 195305 | -6 |
| DISCA | 29 | 241263 | 0 |
| SRPT | 35 | 880893 | -4 |
| SUZ | 4 | 35495 | 1 |
| ERIE | 14 | 58619 | 0 |
| IEP | 4 | 10576402 | 1 |
| AU | 17 | 586074 | 1 |
| Average | 18.3 | 1796293 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $1796 million. That figure was $641 million in WDC’s case. Sarepta Therapeutics Inc (NASDAQ:SRPT) is the most popular stock in this table. On the other hand Suzano S.A. (NYSE:SUZ) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Western Digital Corporation (NASDAQ:WDC) is more popular among hedge funds. Our overall hedge fund sentiment score for WDC is 65.9. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on WDC as the stock returned 45.5% since the end of September (through 12/18) 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.
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Disclosure: None. This article was originally published at Insider Monkey.
