Or some large hedge fund is Long STX and short WDC since 2010 began
Why else would WDC underperform STX by so much This Year
WDC down 10%
STX up 15%
Smells of a pairs trade to me
I just spoke to a buy sider PM who spoke with his inventory contact who thru the years has a far better track revord than most of the other ANALysts:
Your point about a major shipment just coming in is correct. A number of distributors, who were reporting out of or low stock, indicated they expected a major delivery during the past week. So it appears it came in. Another point is that one of the major distributors no longer stocks STX drives, which may have skewed extra delivery to the others.
Despite Huberty's and Avian's concerns, inventories remain seasonally low!
I agree, the key to watch is how quickly these inventories are liquidated.
>> some large hedge fund is Long STX and short WDC since 2010 began <<
Well, I wish them luck with that. According to my value screen, which attempts to reproduce the two metrics used by Joel Greenblatt's Magic Formula (http://www.magicformulainvesting.com), WDC stock is currently a much better value than STX.
TTM pre-tax earnings yields:
STX = 6%
WDC = 15%
TTM pre-tax return on tangible capital employed:
STX = 21%
WDC = 53%
Those are two reasons why I own WDC but not STX at the moment.
Of course, such metrics don't always tell the whole story. But they serve as a good first-order method for doing an initial mass screening of stocks when one is bargain-hunting.
>> Why else would WDC underperform STX by so much This Year? <<
I don't know, but then just because one isn't aware of alternative explanations for something doesn't mean that such explanations don't exist. I suspect that if one wanted to look at both companies in detail one could come up with multiple plausible explanations as to why Seagate has gone up since the beginning of the year and Western Digital has gone down during the same timeframe. I haven't bothered to look into Seagate, so I can't help you with this exercise.
The early Greeks noticed that the Sun moved across the sky every day and never stood still. The only explanation they could come up with was that the god Helios, as one of his divine duties, drove a giant invisible chariot that towed the sun across the sky. This seemed like the only plausible explanation at the time it was conceived, though a number of centuries later a few Greek intellectuals began to suspect that maybe there were other possible explanations (one of them going so far as to propose that the earth was, of all things, a rotating sphere).
I myself don't really care why a given stock fluctuates in price, because I don't think it's particularly important from an investing standpoint. I just care about figuring out whether a given stock is overvalued or undervalued at its current price, and by approximately how much. For all I know, maybe you're right and the god of manipulation (we'll call him "Manipulos") sits atop his skyscraper in Manhattan pulling levers every day to control the prices of stocks according to his whim. Works for me.
Excellent post. As I typed on another thread, I have watched stocks under perform forever, until they just shoot to the moon out of nowhere.
It can go from 12-48 without a problem, but then a couple months of consolidation at 40 freaks everyone out.