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Hedge Funds Never Been This Bullish On Waste Connections, Inc. (WCN)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Waste Connections, Inc. (NYSE:WCN) and determine whether the smart money was really smart about this stock.

Waste Connections, Inc. (NYSE:WCN) has experienced an increase in activity from the world’s largest hedge funds of late. Waste Connections, Inc. (NYSE:WCN) was in 39 hedge funds’ portfolios at the end of June. The all time high for this statistics is 37. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that WCN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

MOORE GLOBAL INVESTMENTS

Louis Bacon Moore of Moore Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to take a look at the key hedge fund action regarding Waste Connections, Inc. (NYSE:WCN).

What have hedge funds been doing with Waste Connections, Inc. (NYSE:WCN)?

At the end of the second quarter, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards WCN over the last 20 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Is WCN A Good Stock To Buy?

Among these funds, Waratah Capital Advisors held the most valuable stake in Waste Connections, Inc. (NYSE:WCN), which was worth $230 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $175.9 million worth of shares. Junto Capital Management, Point State Capital, and Echo Street Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Waratah Capital Advisors allocated the biggest weight to Waste Connections, Inc. (NYSE:WCN), around 31.63% of its 13F portfolio. Galibier Capital Management is also relatively very bullish on the stock, dishing out 8.22 percent of its 13F equity portfolio to WCN.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Junto Capital Management, managed by James Parsons, created the largest position in Waste Connections, Inc. (NYSE:WCN). Junto Capital Management had $41 million invested in the company at the end of the quarter. Zach Schreiber’s Point State Capital also made a $38.2 million investment in the stock during the quarter. The other funds with brand new WCN positions are Dmitry Balyasny’s Balyasny Asset Management, John Brennan’s Sirios Capital Management, and Louis Bacon’s Moore Global Investments.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Waste Connections, Inc. (NYSE:WCN) but similarly valued. We will take a look at Telefonica S.A. (NYSE:TEF), Otis Worldwide Corporation (NYSE:OTIS), Fastenal Company (NASDAQ:FAST), Barclays PLC (NYSE:BCS), STMicroelectronics N.V. (NYSE:STM), Nikola Corporation (NASDAQ:NKLA), and Marathon Petroleum Corp (NYSE:MPC). All of these stocks’ market caps are closest to WCN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TEF 6 9842 -1
OTIS 56 2110419 52
FAST 34 633636 0
BCS 8 35407 -5
STM 12 55960 1
NKLA 29 1382479 16
MPC 62 1444528 5
Average 29.6 810324 9.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $810 million. That figure was $721 million in WCN’s case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 6 bullish hedge fund positions. Waste Connections, Inc. (NYSE:WCN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WCN is 69.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately WCN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on WCN were disappointed as the stock returned 7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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Disclosure: None. This article was originally published at Insider Monkey.