Is Western Digital (WDC) Stock A Buy or Sell?

Is Western Digital Corporation (NASDAQ:WDC) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is WDC stock a buy or sell? Western Digital Corporation (NASDAQ:WDC) was in 44 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 56. WDC has experienced an increase in enthusiasm from smart money lately. There were 39 hedge funds in our database with WDC positions at the end of the third quarter. Our calculations also showed that WDC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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.

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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 (or at the end of this article). Keeping this in mind we’re going to take a glance at the key hedge fund action encompassing Western Digital Corporation (NASDAQ:WDC).

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

Heading into the first quarter of 2021, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards WDC over the last 22 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Arrowstreet Capital was the largest shareholder of Western Digital Corporation (NASDAQ:WDC), with a stake worth $338.3 million reported as of the end of December. Trailing Arrowstreet Capital was Lyrical Asset Management, which amassed a stake valued at $241.1 million. Thunderbird Partners, Holocene Advisors, and Renaissance Technologies 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 13.94% of its 13F portfolio. Maple Rock Capital is also relatively very bullish on the stock, dishing out 5.38 percent of its 13F equity portfolio to WDC.

There weren’t any hedge funds initiating brand new positions in the stock during the fourth quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Western Digital Corporation (NASDAQ:WDC) but similarly valued. We will take a look at IAC/InterActiveCorp (NASDAQ:IAC), Royal Caribbean Group (NYSE:RCL), United Rentals, Inc. (NYSE:URI), Halliburton Company (NYSE:HAL), Trimble Inc. (NASDAQ:TRMB), Zendesk Inc (NYSE:ZEN), and Energy Transfer L.P. (NYSE:ET). This group of stocks’ market valuations resemble WDC’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.7 hedge funds with bullish positions and the average amount invested in these stocks was $1229 million. That figure was $1297 million in WDC’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Trimble Inc. (NASDAQ:TRMB) is the least popular one with only 21 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 58.6. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on WDC as the stock returned 27.4% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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