The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Western Digital Corporation (NASDAQ:WDC) based on those filings.
Western Digital Corporation (NASDAQ:WDC) has experienced a decrease in hedge fund interest in recent months. Our calculations also showed that WDC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
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 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Steven Cohen of Point72 Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the key hedge fund action regarding Western Digital Corporation (NASDAQ:WDC).
Hedge fund activity in Western Digital Corporation (NASDAQ:WDC)
At the end of the first quarter, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. By comparison, 33 hedge funds held shares or bullish call options in WDC a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Lyrical Asset Management was the largest shareholder of Western Digital Corporation (NASDAQ:WDC), with a stake worth $174.2 million reported as of the end of September. Trailing Lyrical Asset Management was Citadel Investment Group, which amassed a stake valued at $63.2 million. Citadel Investment Group, Iridian Asset Management, and Point72 Asset Management 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 Lyrical Asset Management allocated the biggest weight to Western Digital Corporation (NASDAQ:WDC), around 4.28% of its 13F portfolio. Mondrian Capital is also relatively very bullish on the stock, dishing out 4.03 percent of its 13F equity portfolio to WDC.
Due to the fact that Western Digital Corporation (NASDAQ:WDC) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedge funds that decided to sell off their entire stakes last quarter. Intriguingly, Lee Ainslie’s Maverick Capital dropped the largest investment of all the hedgies monitored by Insider Monkey, comprising an estimated $39.4 million in stock, and John Hurley’s Cavalry Asset Management was right behind this move, as the fund said goodbye to about $26.3 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 4 funds last 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 Extra Space Storage, Inc. (NYSE:EXR), Energy Transfer L.P. (NYSE:ET), Wheaton Precious Metals Corp. (NYSE:WPM), and Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY). All of these stocks’ market caps are closest to WDC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EXR | 16 | 186130 | -12 |
| ET | 33 | 421900 | -3 |
| WPM | 25 | 545094 | -5 |
| ALNY | 34 | 840647 | 1 |
| Average | 27 | 498443 | -4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $498 million. That figure was $560 million in WDC’s case. Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) is the most popular stock in this table. On the other hand Extra Space Storage, Inc. (NYSE:EXR) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Western Digital Corporation (NASDAQ:WDC) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. Unfortunately WDC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on WDC were disappointed as the stock returned 3.3% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
