Hedge Funds Are Coming Back To Waste Management, Inc. (WM)

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Waste Management, Inc. (NYSE:WM).

Is Waste Management, Inc. (NYSE:WM) a buy right now? Hedge funds were in a bullish mood. The number of bullish hedge fund positions went up by 7 recently. Waste Management, Inc. (NYSE:WM) was in 39 hedge funds’ portfolios at the end of June. The all time high for this statistic is 52. Our calculations also showed that WM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 32 hedge funds in our database with WM positions at the end of the first quarter.

At the moment there are tons of gauges investors use to grade stocks. A duo of the most underrated gauges are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can beat the broader indices by a superb amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Zilvinas Mecelis of Covalis Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a look at the recent hedge fund action regarding Waste Management, Inc. (NYSE:WM).

Do Hedge Funds Think WM Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WM over the last 24 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

The largest stake in Waste Management, Inc. (NYSE:WM) was held by Bill & Melinda Gates Foundation Trust, which reported holding $2610.8 million worth of stock at the end of June. It was followed by Impax Asset Management with a $366.7 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and Locust Wood Capital Advisers. 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 10.94% of its 13F portfolio. Locust Wood Capital Advisers is also relatively very bullish on the stock, dishing out 4.77 percent of its 13F equity portfolio to WM.

As aggregate interest increased, specific money managers have jumped into Waste Management, Inc. (NYSE:WM) headfirst. Covalis Capital, managed by Zilvinas Mecelis, initiated the biggest position in Waste Management, Inc. (NYSE:WM). Covalis Capital had $8.9 million invested in the company at the end of the quarter. Alexander Mitchell’s Scopus Asset Management also made a $7 million investment in the stock during the quarter. The following funds were also among the new WM investors: Louis Bacon’s Moore Global Investments, Donald Sussman’s Paloma Partners, and Philip Best’s Quaero Capital.

Let’s now review 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 Eaton Corporation plc (NYSE:ETN), Workday Inc (NASDAQ:WDAY), Itau Unibanco Holding SA (NYSE:ITUB), Ecolab Inc. (NYSE:ECL), Northrop Grumman Corporation (NYSE:NOC), DoorDash, Inc. (NYSE:DASH), and Emerson Electric Co. (NYSE:EMR). This group of stocks’ market valuations resemble WM’s market valuation.

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As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks was $2898 million. That figure was $3600 million in WM’s case. Workday Inc (NASDAQ:WDAY) is the most popular stock in this table. On the other hand Itau Unibanco Holding SA (NYSE:ITUB) is the least popular one with only 16 bullish hedge fund positions. Waste Management, Inc. (NYSE:WM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WM is 53. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. A small number of hedge funds were also right about betting on WM as the stock returned 10.4% since the end of the second quarter (through 10/11) and outperformed the market by an even larger margin.

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