Though its chart action has held up well compared to many other stocks lately, Western Digital (WDC) still serves as a reminder of why it may be risky to buy stocks during a market downturn. The company, which makes hard drives for computers, servers and other electronics gear, last appeared in the Daily Stock Analysis in early May, when it was forming a potentially bullish chart pattern. It cleared that pattern, but is now pulling back, along with the general market.
- Western Digital's fundamentals look good: Earnings have been excellent the past three quarters, and the company has a solid history of sales growth for the past seven quarters.
- Its three-to-five year earnings growth rate is a healthy 30%.
- A growing number of mutual funds bought shares in each of the past three quarters.
- Its Return on equity is strong, at 30%.
- Here's a warning sign, which we noted back in May: The industry group has a Relative Strength Rating of just 54, so the group's price performance is only a little better than average.
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