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Hedge Funds Picking Up Some Waste Management, Inc. (WM) Shares

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Waste Management, Inc. (NYSE:WM).

Waste Management, Inc. (NYSE:WM) investors should be aware of an increase in hedge fund interest lately. Our calculations also showed that WM isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 51 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the recent hedge fund action encompassing Waste Management, Inc. (NYSE:WM).

How have hedgies been trading Waste Management, Inc. (NYSE:WM)?

At Q1’s end, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the fourth quarter of 2019. By comparison, 33 hedge funds held shares or bullish call options in WM a year ago. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

More specifically, Bill & Melinda Gates Foundation Trust was the largest shareholder of Waste Management, Inc. (NYSE:WM), with a stake worth $1724.7 million reported as of the end of September. Trailing Bill & Melinda Gates Foundation Trust was AQR Capital Management, which amassed a stake valued at $287.9 million. Impax Asset Management, Two Sigma Advisors, and D E Shaw 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 Bill & Melinda Gates Foundation Trust allocated the biggest weight to Waste Management, Inc. (NYSE:WM), around 9.94% of its 13F portfolio. Valinor Management LLC is also relatively very bullish on the stock, designating 4.51 percent of its 13F equity portfolio to WM.

As one would reasonably expect, specific money managers were leading the bulls’ herd. Renaissance Technologies, initiated the biggest position in Waste Management, Inc. (NYSE:WM). Renaissance Technologies had $43.8 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $7.6 million position during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Michael Gelband’s ExodusPoint Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Waste Management, Inc. (NYSE:WM) but similarly valued. We will take a look at Edwards Lifesciences Corporation (NYSE:EW), L3Harris Technologies, Inc. (NYSE:LHX), Banco Santander, S.A. (NYSE:SAN), and Honda Motor Co Ltd (NYSE:HMC). This group of stocks’ market values resemble WM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EW 49 1405375 4
LHX 43 1593570 -5
SAN 18 348505 -3
HMC 8 144471 -1
Average 29.5 872980 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $873 million. That figure was $2563 million in WM’s case. Edwards Lifesciences Corporation (NYSE:EW) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 8 bullish hedge fund positions. Waste Management, Inc. (NYSE:WM) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately WM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on WM were disappointed as the stock returned 15.3% 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.