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Is Seagate Technology Holdings plc (STX) A Good Stock To Buy?

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At Insider Monkey, we pore over the filings of nearly 867 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30th. In this article, we will use that wealth of knowledge to determine whether or not Seagate Technology Holdings plc (NASDAQ:STX) makes for a good investment right now.

Is STX a good stock to buy? Seagate Technology Holdings plc (NASDAQ:STX) shareholders have witnessed a decrease in hedge fund sentiment recently. Seagate Technology Holdings plc (NASDAQ:STX) was in 27 hedge funds' portfolios at the end of September. The all time high for this statistic is 38. There were 31 hedge funds in our database with STX holdings at the end of June. Our calculations also showed that STX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now we're going to analyze the new hedge fund action encompassing Seagate Technology Holdings plc (NASDAQ:STX).

Jeff Ubben VALUEACT CAPITAL
Jeff Ubben VALUEACT CAPITAL

Jeffrey Ubben, Founder of ValueAct Capital and Inclusive Capital Partners

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

At third quarter's end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in STX a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

More specifically, ValueAct Capital was the largest shareholder of Seagate Technology Holdings plc (NASDAQ:STX), with a stake worth $1434 million reported as of the end of September. Trailing ValueAct Capital was Polar Capital, which amassed a stake valued at $110.1 million. Citadel Investment Group, Two Sigma Advisors, and Antipodes Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position ValueAct Capital allocated the biggest weight to Seagate Technology Holdings plc (NASDAQ:STX), around 16.61% of its 13F portfolio. Panview Capital is also relatively very bullish on the stock, designating 6.89 percent of its 13F equity portfolio to STX.

Seeing as Seagate Technology Holdings plc (NASDAQ:STX) has experienced falling interest from the smart money, it's easy to see that there were a few money managers that slashed their positions entirely last quarter. Intriguingly, Dmitry Balyasny's Balyasny Asset Management cut the biggest investment of all the hedgies followed by Insider Monkey, valued at about $422.6 million in stock. Phill Gross and Robert Atchinson's fund, Adage Capital Management, also dropped its stock, about $9.3 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 4 funds last quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Seagate Technology Holdings plc (NASDAQ:STX) but similarly valued. We will take a look at Hewlett Packard Enterprise Company (NYSE:HPE), Qorvo Inc (NASDAQ:QRVO), Cincinnati Financial Corporation (NASDAQ:CINF), Ally Financial Inc (NYSE:ALLY), Duke Realty Corporation (NYSE:DRE), KB Financial Group, Inc. (NYSE:KB), and Healthpeak Properties, Inc. (NYSE:PEAK). This group of stocks' market values are similar to STX's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HPE,33,1002469,-1 QRVO,44,1950993,4 CINF,20,661958,-2 ALLY,57,2517368,3 DRE,13,67287,-2 KB,8,21128,0 PEAK,20,202911,-2 Average,27.9,917731,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $918 million. That figure was $1806 million in STX's case. Ally Financial Inc (NYSE:ALLY) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 8 bullish hedge fund positions. Seagate Technology Holdings plc (NASDAQ:STX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for STX is 41.7. 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 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 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. A small number of hedge funds were also right about betting on STX as the stock returned 24.7% since the end of the third quarter (through 12/9) and outperformed the market by an even larger margin.

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