Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth depends on it. Regardless of the various methods used by elite investors like David Tepper and Dan Loeb, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
Is Western Digital Corp. (NASDAQ:WD) a first-rate investment now? Investors who are in the know are selling. The number of bullish hedge fund positions fell by 2 lately. WD was in 16 hedge funds’ portfolios at the end of the third quarter of 2015. There were 18 hedge funds in our database with WD holdings at the end of the previous quarter. At the end of this article we will also compare WD to other stocks, including Installed Building Products Inc (NYSE:IBP), Ehi Car Services Ltd (ADR) (NYSE:EHIC), and New Mountain Finance Corp. (NYSE:NMFC) to get a better sense of its popularity.
Follow Walker & Dunlop Inc. (NASDAQ:WD)
Follow Walker & Dunlop Inc. (NASDAQ:WD)
To most investors, hedge funds are assumed to be unimportant, old investment tools of yesteryear. While there are over 8000 funds in operation today, Our experts hone in on the elite of this club, about 700 funds. These investment experts handle the majority of the smart money’s total capital, and by shadowing their highest performing equity investments, Insider Monkey has come up with a number of investment strategies that have historically outpaced the market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Keeping this in mind, let’s take a peek at the recent action regarding Western Digital Corp. (NASDAQ:WD).
What does the smart money think about Western Digital Corp. (NASDAQ:WDC)?
Heading into Q4, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the most valuable position in Western Digital Corp. (NASDAQ:WDC), worth close to $8.6 million, accounting for less than 0.1%% of its total 13F portfolio. The second most bullish fund is D E Shaw, holding a $4.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism contain Porter Collins, Daniel Moses, and Vincent Daniel’s Seawolf Capital, John Overdeck and David Siegel’s Two Sigma Advisors and Ken Fisher’s Fisher Asset Management.
Judging by the fact that Western Digital Corp. (NASDAQ:WDC) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedgies that slashed their full holdings heading into Q4. At the top of the heap, Jim Simons’ Renaissance Technologies dropped the largest stake of all the hedgies watched by Insider Monkey, totaling about $3 million in stock. Andy Redleaf’s fund, Whitebox Advisors, also sold off its stock, about $0.8 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to Western Digital Corp. (NASDAQ:WDC). These stocks are Installed Building Products Inc (NYSE:IBP), Ehi Car Services Ltd (ADR) (NYSE:EHIC), New Mountain Finance Corp. (NYSE:NMFC), and Brooks Automation, Inc. (USA) (NASDAQ:BRKS). This group of stocks’ market values resemble WD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IBP | 19 | 106141 | 5 |
| EHIC | 5 | 16151 | -1 |
| NMFC | 7 | 5756 | 0 |
| BRKS | 15 | 59132 | 7 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $36 million in WD’s case. Installed Building Products Inc (NYSE:IBP) is the most popular stock in this table with 19 funds reporting stakes. On the other hand Ehi Car Services Ltd (ADR) (NYSE:EHIC) is the least popular one with only 5 bullish hedge fund positions. Western Digital Corp. (NASDAQ:WDC) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard IBP might be a better candidate to consider a long position.
