Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Western Digital Corporation (NASDAQ:WDC).
Western Digital Corporation (NASDAQ:WDC) has experienced an increase in support from the world’s most elite money managers of late. Western Digital Corporation (NASDAQ:WDC) was in 44 hedge funds’ portfolios at the end of December. The all time high for this statistic is 56. There were 39 hedge funds in our database with WDC holdings at the end of September. 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 (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. 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 hydrogen fuel cell 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 let’s view the recent hedge fund action regarding Western Digital Corporation (NASDAQ:WDC).
Do Hedge Funds Think WDC Is A Good Stock To Buy Now?
At fourth quarter’s end, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in WDC over the last 22 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
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, setting aside 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 also examine hedge fund activity in other stocks similar to Western Digital Corporation (NASDAQ:WDC). We will take a look at IAC/InterActiveCorp (NASDAQ:IAC), Royal Caribbean Cruises Ltd. (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 values match WDC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IAC | 67 | 2230707 | -5 |
| RCL | 37 | 554165 | 7 |
| URI | 46 | 1060784 | 6 |
| HAL | 31 | 1027399 | -1 |
| TRMB | 21 | 1330232 | -14 |
| ZEN | 58 | 1858196 | -1 |
| ET | 25 | 543271 | -6 |
| Average | 40.7 | 1229251 | -2 |
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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on WDC as the stock returned 27.5% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
