Western Digital ($WDC) Quant Rating & AI Storage Analysis | Seeking Alpha | Seeking Alpha

Steven Cress joins Nicole Benjamin on The Weekly Grade to break down how the surge in AI training, inference, and cloud workloads is creating critical data center storage bottlenecks. Discover why recent market pullbacks have significantly improved Western Digital's ($WDC) valuation framework. Read Steven Cress' Article on Seeking Alpha Bundle the Alpha Picks and Quant Growth & Income Portfolios Now! This transcript was generated by AI. It is not curated or reviewed and is provided for convenience and information purposes only. The accuracy and completeness of the transcript are not guaranteed. Nicole Benjamin: Hey, everybody. It's Nicole Benjamin, your host here at Seeking Alpha, to bring to you another episode of The Weekly Grade, where we're bringing to you market insights in minutes. Now joining us for today's episode is none other than Steven Cress himself, VP of quantitative strategy here at Seeking Alpha. He's the wonderful guy behind a lot of the wonderful products we have here on site, our Pro Quant portfolio, our Alpha Picks portfolio, and our newest Quant Growth and Income portfolio. So Steve, thank you so much for joining us today. Steven Cress: Yeah, as always, thank you for organizing it. Pleasure to be here. NB: Absolutely. Now, I wanna jump right in, Steve. We're talking today about Western Digital Corporation, and I see here that the platform highlights Western Digital as a top-rated quant strong buy after taking advantage of the September drawdowns. So how is the surge in data generated by AI training, inference, and cloud computing transforming high-capacity hard drives into a primary bottleneck solution? And how has that shifted Western Digital's, you know, valuation? SC: Yeah. Well, it's definitely that bottleneck is an issue for the end customers clients because really Western Digital Corporation and Seagate are the ones that produce these products that are necessary for the hard drives for the servers in the data centers. So it puts their business in a really good spot. And if you look at the chart, you know, this stock for a long time was overvalued, but it was climbing, climbing, climbing. And back in, I guess, June, it reached a peak of, like, seven hundred and forty-eight dollars. So the stock has come up from seven hundred and forty-eight dollars to currently four hundred and sixty dollars. That's an over thirty percent drop from its fifty-two-week high. And the result is that the valuation is extremely attractive now. And the growth for the company has not stopped. So that demand, that bottleneck means they have a huge pipeline. It means the company has consistently quarter in and quarter out been-- it's been having great numbers for their revenues, great numbers for their earnings per share. But because of the current environment, and many stocks in this space came off sharply from June, it's actually an excellent valuation now. So if you look on the right-hand side, you'll see the valuation grade is a B. What that means is relative to the sector, it's got a really attractive valuation because all these factor grades are sector-relative. If you look six months ago, you'll notice it was an F. So during the period when it was yellow here, that was a quant hold, the stock was really overvalued, valued. But when June came around, a lot of the semiconductor companies, a lot of the hardware companies that are directly or indirectly impacted by AI, the stocks took a whopping from June to present. And this is regardless of their earnings, which have been at record levels. So the result is the stock is cheaper than it was, as you can see in this B grade from where it was. Growth is just as strong really as it was. So it puts anybody now in a really opportunistic point in this stock's trading history to acquire the shares. It's currently a quant strong buy. And just to let you know we cover about five hundred and thirty-seven companies in the IT sector. This one ranks nineteen, but within its industry, which is tech hardware and storage, it actually ranks five out of twenty-nine. And when I talk about revenues for Q4, revenues came in at seven point five billion, and that was an increase year over year of forty-four percent. And the earnings per share growth rate going forward on a three to five-year CAGR is seventy percent versus the sector at a mere nineteen percent. So Western Digital, as a result of the success and the orders that they're having as a result of that backlog, as a result of them being really one of two key players in the industry, it's resulting in very strong top and bottom line growth. And because of market sentiment, which has been relatively volatile since June, it actually presents a really good opportunity, and the company has an excellent valuation framework. So that's what we think of the stock right now. NB: All right. Well, Steve, I wanna jump over, speaking of strong buy ratings, strong buy stocks, and talk about what products we have here on site. Now, this slide here, it breaks down the structural differences between our Pro Quant portfolio, our Alpha Picks portfolio, and our newest Quant Growth and Income portfolio. So as somebody's looking at this, how should investors really be evaluating those trade-offs between weekly rebalancing, monthly long-term picks, and even just that biweekly dividend strategy when selecting a model that could be right for them? SC: Yeah. So, you know, if you're interested in these type of type of ideas, and our product performance is very, very strong. So if you want these type of ideas on a frequent basis, we have a couple different products to bring it forward. One product is the Pro Quant portfolio. And for the Pro Quant portfolio, we actually rebalance a fixed number of stocks weekly every Monday. So on average, we provide about two to three new ideas on a weekly basis. And Pro Quant portfolio, if you're looking for high-frequency ideas if you're looking for very little restrictions in terms of what we're looking for so it's got multiple layers in terms of market cap, ranging from mega cap to small cap. Geographic region is wide as well. Sectors are wide as well. So it gives you a lot of diversification. And I always say maximum diversification is really helpful for Minimizing your risk and maximizing returns. So if you're looking for that and you want high-frequency ideas, ProQuant Portfolio would be your product. If you want ideas but you can't handle that volume of ideas coming in on a weekly basis, we have another product called Alpha Picks. And Alpha Picks gives you our top two Quant strong buys every month, on the first of the month and the fifteenth of the month. So it's very user-friendly, and you're sort of ready at those dates to get your recommendation. And Alpha Picks has really strong performance as well. I'm gonna show you the performance for all these products on the next slide. So those two products would be great if you want ideas that are focused on long-term capital appreciation. If you want something that's more of an all-weather portfolio and the stocks pay a dividend, you would want the Quant Growth and Income. That's a fixed portfolio of 30 stocks, and it rebalances twice a month, and on average, there's two to three new ideas when we come out with it. It's usually every other Wednesday. And you'll have two to three ideas that are always stocks that have dividends. So the purpose of this is capital appreciation and income generation. Where with the other two products, we're really just going for that capital appreciation. One is a high frequency of ideas and the other is a lower frequency. NB: Well, speaking of those metrics, here on this slide, I see that all three of these portfolios are continuing to maintain that strong performance, leading their respective benchmarks. So with September historically serving as this seasonal low before October, November market rallies, how does the quantitative model ensure investors capitalize on the seasonal pullbacks without taking any speculative risk? SC: Yeah. Well, what that is, is it's really a disciplined process. So it really tries to actually ignore the white noise and the macro environment. It avoids the talking heads on TV. It's all about the data. So what happens is when markets come off, it's still bringing you companies that, based on our calculations, and we rebalance our overall portfolios our universe, I should say, of stocks every single day. And that w- means that we go through cash flow statements, income statements, balance sheets, and hundreds of financial metrics for each stock, and we rank the strongest to the weakest. And what our system does, particularly with Alpha Picks, ProQuant Portfolio, and Quant Growth and Income, is the days that we're recommending those stocks, you know that the system has been refreshed, it's current, so it's very relevant to that time. And often, when you have seasonal weakness, it really can provide some opportunities like Western Digital Corporation. So here's a stock where it has had no slowdown in terms of their revenues or their earnings, but the stock has come off. So the Quant system will definitely focus on that. We're looking for companies that are collectively strong on value, growth, profitability, positive analyst revisions, and momentum. And that's what each of these portfolios performs, is it brings forward stocks that are attractive on those characteristics. So as you can see from the performance, we have a very good track record with identifying stocks that have those attributes, but more importantly, also provide the performance. NB: All right. Well, I think I wanna wrap things up there, Steve. Thank you so much for joining us today. And for everybody that's listening in, go ahead, click the Follow button on Steve's page, go read some of those articles and see if any of these portfolios might be right for you. Now, before we jump out of here, past performance is no guarantee of future results. Content is offered for information purposes only. Unless stated otherwise, any and all individuals participating in the video are third parties that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body. Unless stated otherwise, the views or opinions expressed may not reflect those of Seeking Alpha as a whole. The accuracy and completeness of content shared cannot be guaranteed. Seeking Alpha does not take account of your objectives or financial situation and does not offer any personalized investment advice. Seeking Alpha is not a licensed securities dealer, broker, US investment advisor, or investment bank. Thank you so much, and we'll see you here next time. Read Steven Cress' Article on Seeking Alpha Bundle the Alpha Picks and Quant Growth & Income Portfolios Now! Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Western Digital ($WDC) Quant Rating & AI Storage Analysis | Seeking Alpha | Seeking Alpha

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