- Selection for this week
- Some Pros about the stock
- Some Cons about the stock
- Why the Quants like this stock
- Criteria for choosing
- The previous selections
The momentum stocks in the portfolio held their ground since last Thursday in spite of the general sell off in momentum stocks. An encouraging sign for future gains in the portfolio.
Add: WDC (Western Digital) – Computer Hardware
What does the company do?
Western Digital Corporation develops, manufactures, and sells data storage devices and solutions primarily based on hard disk drive (HDD) technology across global markets. Its products include internal and data-center drives, storage platforms, external and portable drives, NAS systems, and related accessories. The company distributes its products through sales teams, dealers, distributors, retailers, and subsidiaries, and also collaborates with Open Quantum Design on quantum error-correction technology and systems. Founded in 1970, Western Digital is headquartered in San Jose, California.
Why Some Investors Are Bullish
- Strong AI/data-center demand: Q4 revenue rose 44% YoY to $3.75 billion, while cloud remained the dominant end market as demand for high-capacity storage continued to grow.
- Powerful profitability: Non-GAAP operating income reached $1.66 billion, while adjusted EPS of $3.56 more than doubled year over year; non-GAAP operating margin was about 44%.
- Strong outlook: WD expects Q1 FY27 revenue to grow 42%–49% YoY, signaling continued momentum into the new fiscal year.
- Cloud is the key engine: Cloud accounted for 89% of FY2026 revenue and grew 38% for the year, driven by higher exabyte shipments and stronger pricing.
- Massive stock rally: WDC has experienced an extraordinary rerating, reaching a 52-week high of $799.87 before pulling back significantly; the stock remains highly volatile, with a beta above 2.
What Bears Are Worried About
- Expectations are extremely high: WDC shares fell sharply after its strong Q4 results despite the earnings beat, showing that investors are demanding increasingly strong results from the AI-storage story.
- Valuation and volatility have increased: The stock’s current forward P/E is around 22x but that still represents a substantial valuation increase from its historical levels, while its beta of 2.22 highlights significant volatility.
- Cyclical storage business: Western Digital remains exposed to fluctuations in storage pricing, demand and capacity cycles; after such a dramatic rally, I would be cautious about assuming the current growth rate can continue indefinitely. The biggest risk is that expectations for AI-driven storage demand and pricing may already be very high.
Why the Quants like this stock
- PEG Non-GAAP (FWD) A+ 0.32
- Revenue Growth (FWD) A 40.23%
- EPS FWD Long Term Growth (3-5Y CAGR) A+ 69.81%
- ROE Growth (FWD) A 47.50%
- Return on Total Capital (TTM) A+ 28.29%
- 6M Price Performance A 66.21%
- FY1 Up Revisions (last 90 days) 20 Up & 0 Down
- Latest Quarter’s Earnings
- Announce Date 8/5/2026
- EPS Normalized Actual $3.56 (Beat by $0.26)
- EPS GAAP Actual $8.21 (Beat by $5.18)
- Revenue Actual $3.75B
- Revenue Surprise Beat by $48.25M
My View
The fundamental story is exceptionally strong, with 44% revenue growth, expanding margins, strong cash generation and continued data-center demand, but the stock has already experienced an enormous rerating. I would focus less on whether AI storage remains a growth market—which appears clear—and more on whether WDC can sustain its current growth, pricing and margins at today’s valuation.
Top Quant Stock of the Week Criteria
I am using a Quantitative research platform that provides a daily list of top-ranked stocks to buy or sell, based on a Comprehensive Quant Score. This Quant system uses computer algorithms to come up with its rankings. This score incorporates multiple factors, including valuation, growth, profitability, momentum, and EPS revisions.
I will be giving heavy weight to strong momentum and strong EPS revisions to make the weekly selection. Then, I will use my tested proprietary criteria to sort and then break any tie.
One stock will be selected each week. That would make 52 selections a year if I don’t miss any weeks because of internet problems.
The hold times for the stocks added will be 1 week to years. Although a 1 week hold would be rare, it could happen if the stocks Quant metrics took a big nose dive right after being selected. If an added stock maintains its good metrics, it will be kept in the portfolio until it doesn’t. No time limit. The Quant system will tell me when it is time to let it go. So the hold time is short, medium and long depending on the Quant system metrics.
All countries are included. ADR’s are ok but Pink Sheet stocks will not be allowed.
Certain Industries are excluded. My testing shows they do not perform well using Quantitative rankings. Two of the main ones are BioTechnology and Pharmacueticals.
The Remove Criteria: Once the stock no longer qualifies to be retained in the Portfolio, it will be removed. This could be because the companies metrics have deteriorated since selection, it is involved in a buyout or financial reporting problems.
Once a stock has been added to the Active list, it will not be added to. No doubling down.
The stocks considered are larger small cap, mid cap, large cap and Mega cap. They will be fairly easy to trade with opening or closing market orders as one of the ways to enter and exit positions.
It should be expected that about 50 stocks will be Active in the Portfolio in any given week, once it gets to the two year mark.
All stocks are added as equal weight. No rebalancing is to occur.
To be considered for addition, the stock has to be in the top group of Quant rankings for just several weeks. This is to allow newly upgraded stocks to qualify quickly. Hopefully, this will catch a couple of strong momentum stocks early in their move.
Once a stock is removed for cause, it can be added back in once it meets the add criteria. No waiting period is required.
There will be no limits on percentages of stocks in the Portfolio by Sector or Industry.
Previous Selections:
All content on this site is for informational purposes only and does not constitute financial advice. Consult relevant financial professionals in your country of residence to get personalized advice before you make any trading or investing decisions. This post was written with the assistance of artificial intelligence. The original ideas and final review are human-generated. Disclaimer
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