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Hedge Funds Aren’t Done Buying Workday Inc (WDAY)

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Workday Inc (NASDAQ:WDAY) and determine whether hedge funds skillfully traded this stock.

Workday Inc (NASDAQ:WDAY) was in 73 hedge funds’ portfolios at the end of June. The all time high for this statistics is 58. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. WDAY investors should pay attention to an increase in enthusiasm from smart money in recent months. There were 58 hedge funds in our database with WDAY holdings at the end of March. Our calculations also showed that WDAY isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

To most traders, hedge funds are perceived as underperforming, outdated investment vehicles of years past. While there are over 8000 funds in operation at present, Our experts choose to focus on the moguls of this group, about 850 funds. These investment experts have their hands on the lion’s share of all hedge funds’ total capital, and by observing their unrivaled equity investments, Insider Monkey has identified many investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Bill Miller

Bill Miller of Miller Value Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s go over the fresh hedge fund action encompassing Workday Inc (NASDAQ:WDAY).

How have hedgies been trading Workday Inc (NASDAQ:WDAY)?

At the end of the second quarter, a total of 73 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 26% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in WDAY over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Chase Coleman’s Tiger Global Management LLC has the most valuable position in Workday Inc (NASDAQ:WDAY), worth close to $564 million, comprising 2.2% of its total 13F portfolio. Sitting at the No. 2 spot is Brian Bares of Bares Capital Management, with a $533.8 million position; the fund has 13.2% of its 13F portfolio invested in the stock. Remaining peers that are bullish contain Andreas Halvorsen’s Viking Global, David Blood and Al Gore’s Generation Investment Management and David Goel and Paul Ferri’s Matrix Capital Management. In terms of the portfolio weights assigned to each position Bares Capital Management allocated the biggest weight to Workday Inc (NASDAQ:WDAY), around 13.18% of its 13F portfolio. Half Sky Capital is also relatively very bullish on the stock, designating 12.38 percent of its 13F equity portfolio to WDAY.

As one would reasonably expect, key money managers were leading the bulls’ herd. Kensico Capital, managed by Michael Lowenstein, assembled the largest position in Workday Inc (NASDAQ:WDAY). Kensico Capital had $137.7 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also made a $50.5 million investment in the stock during the quarter. The following funds were also among the new WDAY investors: Josh Donfeld and David Rogers’s Castle Hook Partners, Bill Miller’s Miller Value Partners, and Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali’s Alta Park Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Workday Inc (NASDAQ:WDAY) but similarly valued. These stocks are Edwards Lifesciences Corporation (NYSE:EW), Baxter International Inc. (NYSE:BAX), Itau Unibanco Holding SA (NYSE:ITUB), Biogen Inc. (NASDAQ:BIIB), The Charles Schwab Corporation (NYSE:SCHW), General Dynamics Corporation (NYSE:GD), and Vodafone Group Plc (NASDAQ:VOD). This group of stocks’ market caps resemble WDAY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EW 45 1391002 -4
BAX 59 2583223 9
ITUB 20 352115 4
BIIB 63 3268402 -7
SCHW 71 3295929 9
GD 42 5491682 3
VOD 16 726090 2
Average 45.1 2444063 2.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 45.1 hedge funds with bullish positions and the average amount invested in these stocks was $2444 million. That figure was $3445 million in WDAY’s case. The Charles Schwab Corporation (NYSE:SCHW) is the most popular stock in this table. On the other hand Vodafone Group Plc (NASDAQ:VOD) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Workday Inc (NASDAQ:WDAY) is more popular among hedge funds. Our overall hedge fund sentiment score for WDAY is 90. 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 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 28.2% in 2020 through August 24th and still beat the market by 20.6 percentage points. Unfortunately WDAY wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on WDAY were disappointed as the stock returned 2.3% since the end of the second quarter 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.