Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets, hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Waste Connections, Inc. (NYSE:WCN).
Is Waste Connections, Inc. (NYSE:WCN) the right investment to pursue these days? Investors who are in the know are betting on the stock. The number of long hedge fund bets increased by 1 recently. At the end of this article we will also compare WCN to other stocks including Brookfield Infrastructure Partners L.P. (NYSE:BIP), Axalta Coating Systems Ltd (NYSE:AXTA), and YPF SA (ADR) (NYSE:YPF) to get a better sense of its popularity.
Follow Waste Connections Us Inc. (NYSE:WCN)
Follow Waste Connections Us Inc. (NYSE:WCN)
If you’d ask most stock holders, hedge funds are seen as unimportant, old financial tools of the past. While there are over 8000 funds trading at present, our researchers hone in on the masters of this club, about 700 funds. It is estimated that this group of investors orchestrate bulk of the smart money’s total capital, and by shadowing their unrivaled picks, Insider Monkey has come up with various investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Keeping this in mind, let’s view the recent action regarding Waste Connections, Inc. (NYSE:WCN).
What have hedge funds been doing with Waste Connections, Inc. (NYSE:WCN)?
At Q3’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Hoplite Capital Management, managed by John Lykouretzos, holds the biggest position in Waste Connections, Inc. (NYSE:WCN). Hoplite Capital Management has a $71.6 million position in the stock, comprising 2.7% of its 13F portfolio. Sitting at the No. 2 spot is Maverick Capital, led by Lee Ainslie, holding a $47.2 million position; 0.8% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish include Brian Ashford-Russell and Tim Woolley’s Polar Capital, Matthew A. Weatherbie’s Weatherbie Capital and Curtis Schenker and Craig Effron’s Scoggin.
As industrywide interest jumped, key hedge funds have jumped into Waste Connections, Inc. (NYSE:WCN) headfirst. Gotham Asset Management, managed by Joel Greenblatt, initiated the largest position in Waste Connections, Inc. (NYSE:WCN). Gotham Asset Management had $4 million invested in the company at the end of the quarter. Robert Vollero and Gentry T. Beach’s Vollero Beach Capital Partners also initiated a $3.8 million position during the quarter. The other funds with brand new WCN positions are Israel Englander’s Millennium Management, Greg Poole’s Echo Street Capital Management, and Ray Dalio’s Bridgewater Associates.
Let’s check out hedge fund activity in other stocks similar to Waste Connections, Inc. (NYSE:WCN). These stocks are Brookfield Infrastructure Partners L.P. (NYSE:BIP), Axalta Coating Systems Ltd (NYSE:AXTA), YPF SA (ADR) (NYSE:YPF), and STMicroelectronics N.V. (ADR) (NYSE:STM). This group of stocks’ market valuations match WCN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BIP | 12 | 25739 | 4 |
| AXTA | 44 | 1786793 | 6 |
| YPF | 32 | 634457 | -2 |
| STM | 6 | 6900 | 1 |
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $613 million, as compared to $324 million in WCN’s case. Axalta Coating Systems Ltd (NYSE:AXTA) is the most popular stock in this table. On the other hand STMicroelectronics N.V. (ADR) (NYSE:STM) is the least popular one with only six bullish hedge fund positions. Waste Connections, Inc. (NYSE:WCN) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AXTA might be a better candidate to consider a long position.
