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Hedge Funds Have Never Been This Bullish On Workday Inc (WDAY)

Is Workday Inc (NASDAQ:WDAY) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Workday Inc (NASDAQ:WDAY) a great investment today? The smart money is taking a bullish view. The number of long hedge fund bets inched up by 2 in recent months. Our calculations also showed that wday isn’t among the 30 most popular stocks among hedge funds. WDAY was in 33 hedge funds’ portfolios at the end of March. There were 31 hedge funds in our database with WDAY holdings at the end of the previous quarter.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

DUQUESNE CAPITAL

Let’s take a glance at the recent hedge fund action encompassing Workday Inc (NASDAQ:WDAY).

Hedge fund activity in Workday Inc (NASDAQ:WDAY)

At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in WDAY over the last 15 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with WDAY Positions

The largest stake in Workday Inc (NASDAQ:WDAY) was held by Bares Capital Management, which reported holding $353.2 million worth of stock at the end of March. It was followed by Matrix Capital Management with a $270 million position. Other investors bullish on the company included Alkeon Capital Management, Holocene Advisors, and Duquesne Capital.

Consequently, key hedge funds were breaking ground themselves. Soros Fund Management, managed by George Soros, established the largest position in Workday Inc (NASDAQ:WDAY). Soros Fund Management had $19.3 million invested in the company at the end of the quarter. Nick Niell’s Arrowgrass Capital Partners also initiated a $18.3 million position during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Matthew Hulsizer’s PEAK6 Capital Management, and Frank Slattery’s Symmetry Peak Management.

Let’s go over hedge fund activity in other stocks similar to Workday Inc (NASDAQ:WDAY). We will take a look at American Electric Power Company, Inc. (NYSE:AEP), Kimberly-Clark Corporation (NYSE:KMB), Marriott International Inc (NASDAQ:MAR), and Dell Technologies Inc. (NYSE:DELL). All of these stocks’ market caps are similar to WDAY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AEP 35 1229038 1
KMB 36 860286 -1
MAR 25 2046505 -7
DELL 37 1816635 -6
Average 33.25 1488116 -3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $1488 million. That figure was $1400 million in WDAY’s case. Dell Technologies Inc. (NYSE:DELL) is the most popular stock in this table. On the other hand Marriott International Inc (NASDAQ:MAR) is the least popular one with only 25 bullish hedge fund positions. Workday Inc (NASDAQ:WDAY) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on WDAY as the stock returned 7.8% during the same time frame and outperformed the market by an even larger margin.

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

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