Hard-disk maker Western Digital (WDC) is another name that enjoyed market-crushing momentum last year, dishing out 94% gains to investors who bet on the computer storage stock this time last year. The computer storage business still has some enormous tailwinds pushing at its back right now, and those should continue to propel the world's biggest hard drive maker to new highs in the year ahead.
Worldwide, demand for storage is increasing like never before. That's because, today, consumers carry around devices that record HD video and photos, store data-intensive applications, and store it all in the cloud. That means that storage is critical both on consumers' local PCs and on the server farms that continue to sprout up.
For conventional hard drive makers, solid state drives represent the future. For now, their costs are keeping SSDs from all but the most performance-demanding tasks, but eventually it's likely they'll supplant HDDs as the standard storage medium. While that's been a threat to firms like WDC, recent acquisitions like STEC should help to boost Western Digital's SSD capabilities.
Western Digital currently has a solid cash position: around $2.5 billion net of debt as of the most recent quarter. And that number is likely to be closer to $3 billion by the time next quarter rolls around. That's enough dry powder to pay for around 12.5% of WDC's current market capitalization right now, a fact that helps reduce the risk in shares after such a big run higher.
If WDC can continue to use cash in a smart way, investors stand to keep benefiting.