Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With this in mind let’s see whether Waste Connections, Inc. (NYSE:WCN) makes for a good investment at the moment. We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Waste Connections, Inc. (NYSE:WCN) ready to rally soon? Money managers are taking a bullish view. The number of long hedge fund positions went up by 3 recently. Our calculations also showed that WCN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). WCN was in 37 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 34 hedge funds in our database with WCN holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are a large number of signals investors have at their disposal to size up publicly traded companies. Two of the less known signals are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the best hedge fund managers can beat their index-focused peers by a significant amount (see the details here).
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the new hedge fund action regarding Waste Connections, Inc. (NYSE:WCN).
How are hedge funds trading Waste Connections, Inc. (NYSE:WCN)?
At the end of the fourth quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in WCN over the last 18 quarters. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Waste Connections, Inc. (NYSE:WCN), which was worth $189.3 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $72.1 million worth of shares. Samlyn Capital, Two Sigma Advisors, and Millennium 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 SAYA Management allocated the biggest weight to Waste Connections, Inc. (NYSE:WCN), around 6.56% of its 13F portfolio. Brasada Capital Management is also relatively very bullish on the stock, earmarking 2.74 percent of its 13F equity portfolio to WCN.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Selz Capital, managed by Bernard Selz, established the biggest position in Waste Connections, Inc. (NYSE:WCN). Selz Capital had $9 million invested in the company at the end of the quarter. Jaime Sterne’s Skye Global Management also initiated a $5.2 million position during the quarter. The following funds were also among the new WCN investors: Michael Gelband’s ExodusPoint Capital, James Dondero’s Highland Capital Management, and Jinghua Yan’s TwinBeech Capital.
Let’s now review hedge fund activity in other stocks similar to Waste Connections, Inc. (NYSE:WCN). These stocks are Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), Entergy Corporation (NYSE:ETR), Kellogg Company (NYSE:K), and Rockwell Automation Inc. (NYSE:ROK). This group of stocks’ market valuations are closest to WCN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALXN | 48 | 2927643 | 0 |
| ETR | 31 | 1402438 | 2 |
| K | 30 | 569797 | 1 |
| ROK | 39 | 614212 | 10 |
| Average | 37 | 1378523 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1379 million. That figure was $624 million in WCN’s case. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is the most popular stock in this table. On the other hand Kellogg Company (NYSE:K) is the least popular one with only 30 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on WCN as the stock returned 3.4% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
