We recently compiled a list of 7 Cheap Rising Stocks to Invest In. In this article we will look at where Western Digital Corporation (NASDAQ:WDC) ranks among the cheap rising stocks.
The recent Fed rate cuts have been a major catalyst for the market, and have provided an additional boost to an already strong performance. The market started the day with another all-time high on September 26 and it seems like the cuts have been positively influencing market sentiment and activity.
Nevertheless, some experts are still saying that investors are moving with caution as the timeline moves closer to the US elections. Wisdomtree CEO, Jonathan Steinberg recently joined CNBC “Money Movers” as he discussed the impact of the Fed’s actions on market flows and noted that while the 50-basis-point rate cut may reduce recession risks, a significant amount of money remains on the sidelines.
Steinberg explained that many investors are cautious, keeping money in safe places like money market funds, due to uncertainty about the upcoming election and its potential impact on the economy. The differing policies of the candidates make it hard to predict market trends, so people are waiting to see the election results before making big investment decisions.
Expert Opinions on the Election
As the elections move closer, the sentiment has been quite mixed around the candidates as it seems like a very close one. While many have a solid opinion on their favorite candidates, economists and market experts might not be feeling the same.
In our article 7 Best Revenue Growth Stocks to Buy According to Analysts, we discussed Professor Jeremy Siegel’s opinions on the Fed cuts and upcoming elections. Here is an excerpt from the article:
“In a discussion about economic policies from the presidential candidates, Professor Siegel critiqued both sides as extreme and said that their policies are unlikely to be implemented. He said that there would be a divided government that would limit any drastic changes. He stressed that while some policies might be proposed, actual governance would lead to compromises rather than sweeping reforms.”
While Professor Siegel remained neutral and criticized both sides, Harvard professor and former Chairman of the Council of Economic Advisers, Jason Furman seems to be leaning more toward the Democratic Party. However, he too criticized the economic plans of both candidates on September 20 in an interview on CNBC’s Squawk Box.
Insights from Jason Furman on Fed Policy
In the discussion about the Fed’s rate cut policy, Furman noted that while he would have preferred a smaller 25-point cut, he does not believe the Fed has inside knowledge of serious economic risks.
He thinks the move only shows caution over rising unemployment. About the unemployment situation, he said that he is, “a little bit nervous about it too, just not quite as nervous as 50 basis points.”
Furman acknowledged that inflation has come down but pointed out that risks such as potential wage-driven inflation and the possibility of a recession are still there. He appreciated the Fed’s gradual approach, which allows for adjustments in future rate decisions if needed.
Our Methodology
For this article, we used stock screeners to identify over 30 stocks with more than 10% share price gain over the last month and a forward price-to-earnings ratio of less than 15 as of September 27. We narrowed our list to 7 stocks most widely held by institutional investors. The 7 cheap rising stocks are listed in ascending order of their hedge fund sentiment which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Western Digital Corporation (NASDAQ:WDC)
FWD PE Ratio: 8.80
1-Month Stock Price Performance: 10.14%
Number of Hedge Fund Holders: 80
Western Digital Corporation (NASDAQ:WDC) has established itself as a leading name in the data storage industry. It specializes in the manufacture and sale of a wide range of storage solutions. It ranks 4th on our list of cheap rising stocks to invest in.
In the second quarter, 80 hedge funds tracked by Insider Monkey held positions in the company and their stakes amounted to nearly $4.06 billion. As of June 30, Millennium Management is the most dominant shareholder in the company and has a position worth $379.707 million.
The company focuses primarily on hard disk drives (HDDs) and solid-state drives (SSDs). Its comprehensive product offerings cater to various needs, including HDDs for personal computers, laptops, and enterprise storage systems marketed under the Western Digital and WD brands.
Additionally, high-performance SSDs are available under the SanDisk brand, known for their speed and reliability, serving both consumer and business markets. The company also develops embedded storage solutions for automotive and industrial applications, along with memory components for smartphones and other electronic devices.
A recent discussion by Rob Soderbery, executive vice president of the Flash Business Unit at Western Digital (NASDAQ:WDC), highlighted the company’s ambitious plans regarding artificial intelligence and machine learning, among other things.
Soderbery said that the company is actively integrating AI into its engineering processes. It is expected to generate around $100 million in productivity gains over the next two years, allowing for reinvestment in growth areas.
Moreover, he mentioned that the company is set to undergo a significant transformation by splitting its business into two publicly traded companies, a move expected in the second half of this year.
One business will concentrate on HDDs, while the other will focus on flash memory products. The separation, described as a “soft-spin,” aims to enhance clarity and focus on each business segment, allowing Western Digital (NASDAQ:WDC) to allocate resources and energy more effectively.
Lastly, the company has projected its revenue for the first quarter of fiscal 2025 to be between $4 billion and $4.2 billion, which signals a positive outlook for the company.
Parnassus Investments stated the following regarding Western Digital Corporation (NASDAQ:WDC) in its Q2 2024 investor letter:
“We re-initiated a position in Western Digital Corporation (NASDAQ:WDC), a manufacturer of memory semiconductor chips and hard disk drives, as we believe earnings expectations are far too low. Semiconductors have been another of our most-alpha-generative industries, thanks to the industry’s secular tailwinds and our in-house expertise. Western Digital stands to benefit from the rapid growth of memory-hungry AI applications. The valuation for Western Digital was low relative to its peers, giving us a way to participate in AI at a reasonable valuation.”
Overall WDC ranks 4th on our list of the cheap rising stocks to invest in. While we acknowledge the potential of WDC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WDC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure. None. This article was originally published on Insider Monkey.
