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Why Workday (WDAY) Is a Smart Long-term Buy?

Alex Smith

Touchstone Sands Capital Institutional Growth Fund recently released its Q1 2020 Investor Letter, a copy of which you can download below. The fund posted a return of -9.45% for the quarter, outperforming its benchmark, the Russell 1000 Growth Index which returned -14.10% in the same quarter. You should check out Touchstone Sands Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, Touchstone Sands Capital highlighted a few stocks and Workday Inc. (NASDAQ:WDAY) is one of them. Workday is an on‑demand financial and human capital management software vendor. Year-to-date, WDAY stock lost 5.3% and on May 14th it had a closing price of $155.23. Its market cap is of $36.7 billion. Here is what Touchstone Sands Capital said:

"The Fund sold Workday, a leading provider of enterprise software applications, largely due to portfolio construction considerations. In the first quarter, we opportunistically added to what we viewed as our best positioned businesses amid the coronavirus-induced market turbulence. To fund those higher-conviction ideas, we had to trim or sell a number of businesses, including Workday. This sale is also part of a general reduction of high-growth/high-valuation software over the last year. We continue to evolve our Fund composition with the growth landscape. That evolution includes reducing the Fund’s software positioning and consolidating around what we view as the strongest companies. While Workday’s business fundamentals have exceeded our expectations, it was the Fund’s smallest software weight, which reflected our conviction relative to the Fund’s other six software businesses. We still believe that the business has attractive longterm growth potential, but no longer fits the concentrated Fund’s portfolio."

In Q4 2019, the number of bullish hedge fund positions on WDAY stock increased by about 25% from the previous quarter (see the chart here), so a number of other hedge fund managers also seem to agree with WDAY’s growth potential.

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