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Is Waste Connections, Inc. (WCN) A Good Stock To Buy?

Is Waste Connections, Inc. (NYSE:WCN) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is Waste Connections, Inc. (NYSE:WCN) a buy here? The best stock pickers are selling. The number of long hedge fund bets shrunk by 4 in recent months. Our calculations also showed that WCN isn’t among the 30 most popular stocks among hedge funds. WCN was in 30 hedge funds’ portfolios at the end of September. There were 34 hedge funds in our database with WCN holdings at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Lee Ainslie MAVERICK CAPITAL

We’re going to check out the key hedge fund action regarding Waste Connections, Inc. (NYSE:WCN).

How are hedge funds trading Waste Connections, Inc. (NYSE:WCN)?

At Q3’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WCN over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

WCN_dec2018

Among these funds, Maverick Capital held the most valuable stake in Waste Connections, Inc. (NYSE:WCN), which was worth $280.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $221.4 million worth of shares. Moreover, Ascend Capital, Scopus Asset Management, and Echo Street Capital Management were also bullish on Waste Connections, Inc. (NYSE:WCN), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Waste Connections, Inc. (NYSE:WCN) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedge funds who sold off their entire stakes by the end of the third quarter. Interestingly, Glenn Russell Dubin’s Highbridge Capital Management said goodbye to the biggest stake of all the hedgies tracked by Insider Monkey, worth an estimated $8 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dumped its stock, about $5.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 4 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Waste Connections, Inc. (NYSE:WCN). We will take a look at Hormel Foods Corporation (NYSE:HRL), Ameriprise Financial, Inc. (NYSE:AMP), KeyCorp (NYSE:KEY), and ORIX Corporation (NYSE:IX). This group of stocks’ market caps are similar to WCN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HRL 12 66675 -1
AMP 33 1293396 3
KEY 41 802842 5
IX 6 6038 1
Average 23 542238 2

View table here if you experience formatting issues.

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 $542 million. That figure was $1.0 billion in WCN’s case. KeyCorp (NYSE:KEY) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard KEY might be a better candidate to consider a long position.

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

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