We recently compiled a list of the Top 10 Undervalued Tech Stocks to Buy According to Hedge Funds.In this article, we are going to take a look at where Western Digital Corporation (NASDAQ:WDC) stands against other top undervalued tech stocks to buy according to hedge funds.
Artificial intelligence was the dominant story in the tech market in 2024, driving significant gains in tech stocks. The rapid advancements in AI have been a catalyst for business value, which has been reflected in the stock market performance of companies directly involved in this technology. Another major driver of the outperformers was the crypto industry. The launch of spot bitcoin exchange-traded funds in January 2024 marked the beginning of a big year for cryptocurrencies, which was further bolstered by Donald Trump’s election victory in November.
However, on January 13, CNBC reported that major tech stocks faced pressure, as the specter of higher inflation drove up Treasury yields and dampened expectations for potential Federal Reserve rate cuts this year. Higher yields increase the cost of capital and can lower both consumer spending and corporate investment. The sell-off in tech stocks extended beyond the megacap tech giants, with quantum computing stocks seeing significant drops. The broader market was also affected, with the S&P 500 and Nasdaq Composite each dropping more than 1%, following a hotter-than-expected jobs report and rising inflation expectations among consumers.
In an interview with CNBC on January 13, Daniel Ives, Global Head of Technology Research at Wedbush Securities, discussed the current state and future prospects of the tech sector, particularly in the context of rising interest rates and a strong dollar. Ives highlighted that the bull market in tech is only halfway through. He argued that strong consumer demand and capital expenditures (CapEx) in artificial intelligence (AI) are driving the sector’s growth, making market dips opportunities to invest in tech stocks. Ives believes that the fundamental strength of tech companies, especially in AI, will continue to drive positive performance and suggests a diversified approach to investing in tech. Ives also discussed the broader market dynamics, including the potential for the Federal Reserve to remain hawkish at its next meeting. He views the current environment as an opportunity to own the winners in the tech sector.
The technology sector continues to offer compelling opportunities for investors seeking value and long-term growth. As the market fluctuates, undervalued stocks offer a critical strategy for maximizing returns.
VWhy Western Digital Corporation (WDC) Is the Top Undervalued Tech Stock to Buy According to Hedge Funds?
A data center filled with racks of hard disk drives and solid state drives.
To compile our list of the top 10 undervalued tech stocks to buy according to hedge funds, we used Finviz and Yahoo stock screeners to find the 40 largest technology companies trading below the forward P/E ratio of 15 as of January 13. We then used Insider Monkey’s Hedge Fund database to rank 10 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Number of Hedge Fund Investors: 66
Forward P/E Ratio as of January 13: 7.89
Western Digital Corporation (NASDAQ:WDC) is a leading technology company that specializes in the development, manufacture, and distribution of data storage solutions. The company offers a comprehensive portfolio of hard disk drives (HDDs), solid-state drives (SSDs), and other data storage technologies. Western Digital Corporation (NASDAQ:WDC) serves a diverse range of end markets, including data centers, cloud computing, consumer electronics, and enterprise applications.
Western Digital Corporation (NASDAQ:WDC) is executing a strategic plan to separate its Flash and HDD businesses, a move aimed at unlocking shareholder value and enhancing operational focus. The company has completed the soft-spin phase, during which it has successfully separated its systems and processes into two distinct stacks. This initiative is designed to ensure that both businesses can operate independently. The separation is expected to be completed by the end of the second quarter of fiscal 2025.
In the HDD segment, Western Digital Corporation (NASDAQ:WDC) is leveraging its UltraSMR (Shingled Magnetic Recording) technology to maintain its leadership position. UltraSMR enables the company to produce the industry’s highest-capacity hard drives, offering unmatched reliability, quality, and performance. The company recently launched the 32 TB UltraSMR and 26 TB CMR drives, which are the world’s first commercially available hard drives with 11 disks. The adoption of UltraSMR by key cloud customers is expanding, and the company expects this technology to drive continued gross margin improvement and revenue growth.
Overall WDC ranks 3rd on our list of top undervalued tech stocks to buy according to hedge funds. While we acknowledge the potential of WDC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WDC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
