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Hedge Funds Are Dumping Workday Inc (WDAY)

·6 min read

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Workday Inc (NASDAQ:WDAY).

Is Workday Inc (NASDAQ:WDAY) a buy here? The smart money was becoming less hopeful. The number of bullish hedge fund bets went down by 11 recently. Workday Inc (NASDAQ:WDAY) was in 69 hedge funds' portfolios at the end of March. The all time high for this statistic is 80. Our calculations also showed that WDAY isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 80 hedge funds in our database with WDAY holdings at the end of December.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Ryan Frick Dorsal Capital
Ryan Frick Dorsal Capital

Ryan Frick of Dorsal Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Now let's review the fresh hedge fund action surrounding Workday Inc (NASDAQ:WDAY).

Do Hedge Funds Think WDAY Is A Good Stock To Buy Now?

At the end of March, a total of 69 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WDAY over the last 23 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 biggest position in Workday Inc (NASDAQ:WDAY), worth close to $1.0254 billion, amounting to 2.4% of its total 13F portfolio. Coming in second is Bares Capital Management, managed by Brian Bares, which holds a $671 million position; the fund has 12.5% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism consist of Lone Pine Capital, Alex Sacerdote's Whale Rock Capital Management and Jaime Sterne's Skye Global Management. In terms of the portfolio weights assigned to each position North Peak Capital allocated the biggest weight to Workday Inc (NASDAQ:WDAY), around 26.71% of its 13F portfolio. Bares Capital Management is also relatively very bullish on the stock, setting aside 12.55 percent of its 13F equity portfolio to WDAY.

Seeing as Workday Inc (NASDAQ:WDAY) has experienced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of fund managers who were dropping their entire stakes last quarter. Interestingly, Andreas Halvorsen's Viking Global dropped the largest stake of all the hedgies watched by Insider Monkey, comprising about $169.6 million in stock. David Blood and Al Gore's fund, Generation Investment Management, also sold off its stock, about $119.3 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 11 funds last quarter.

Let's now take a look at hedge fund activity in other stocks similar to Workday Inc (NASDAQ:WDAY). These stocks are Global Payments Inc (NYSE:GPN), Banco Santander, S.A. (NYSE:SAN), Capital One Financial Corp. (NYSE:COF), Twilio Inc. (NYSE:TWLO), Takeda Pharmaceutical Company Limited (NYSE:TAK), Bank of Montreal (NYSE:BMO), and Analog Devices, Inc. (NASDAQ:ADI). This group of stocks' market caps match WDAY's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPN,62,4558094,7 SAN,15,490548,1 COF,59,3139814,3 TWLO,99,5812460,5 TAK,19,860444,1 BMO,15,204401,4 ADI,50,4860676,-8 Average,45.6,2846634,1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 45.6 hedge funds with bullish positions and the average amount invested in these stocks was $2847 million. That figure was $5180 million in WDAY's case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand Banco Santander, S.A. (NYSE:SAN) is the least popular one with only 15 bullish hedge fund positions. Workday Inc (NASDAQ:WDAY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WDAY is 52. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately WDAY wasn't nearly as popular as these 5 stocks and hedge funds that were betting on WDAY were disappointed as the stock returned -7.4% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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