We recently compiled a list of the 10 Best Low Beta Stocks To Buy. In this article, we are going to take a look at where Waste Connections, Inc. (NYSE:WCN) stands against the other low beta stocks.
After a rough few years, the market is coming together and is on a healthy trajectory. The recent Fed rate cuts triggered a lot of bullish sentiment toward the broader market. For example, on September 20, Business Insider reported that Brian Belski from BMO raised his S&P 500 price target for 2024 to 6,100 from 5,600, followed by the Fed’s recent rate cut and strong seasonal market data.
Moreover, Belski talked about broadening stock market gains and the increased likelihood of a soft landing for the U.S. economy. He finds current elevated valuations justified as he compared the situation to the mid-1990s when the market sustained high multiples.
In addition, Tom Lee of Fundstrat is bullish on the market for several upcoming years and expects the broader market to nearly triple to 15,000 by 2030. His bullish sentiment is driven by demographic shifts, millennial spending, and technology advancements. He mentioned the prime earning years of millennials and Gen Z, which mirror previous periods of high stock market returns. Furthermore, he also highlighted the role of technology in addressing global labor shortages and projects significant spending on AI and tech solutions.
Broadening Market Participation and the Outlook for Recession Risks
On September 24, Prashant Bhayani of BNP Paribas Wealth Management joined CNBC to discuss the current market conditions. He discussed the improving liquidity and noted the tight credit spreads, near-record equities, and steady lending. While U.S. hiring is slowing, he explained that rising unemployment is partly due to labor force growth, not just layoffs, which makes it different from past cycles. Bhayani stressed that employment data, like jobless claims, will be important in determining market outlooks.
On market valuations, Bhayani acknowledged some sectors are overvalued but sees broader market participation beyond AI-related stocks. He suggested that stocks could outperform bonds if a soft landing or no recession occurs.
Addressing concerns about potential triggers for volatility, Bhayani said that a credit event, similar to those seen in 2000 or 2007, could lead to significant market declines. However, current credit spreads and a healthy banking system support the soft landing view.
Our Methodology
For this article, we used the Yahoo Finance stock screener to identify over 30 mid to mega-cap stocks with a 5-year beta (monthly) between 0.2 to 0.8. Next, we narrowed the list to 10 stocks most widely held by institutional investors. The 10 best low-beta stocks to buy are listed in ascending order of their hedge fund sentiment and we used the beta as a tie-breaker as well.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A fleet of waste management trucks driving through a city at sunrise.
Waste Connections, Inc. (NYSE:WCN)
5-year Beta (monthly): 0.72
Number of Hedge Fund Holders: 50
Waste Connections, Inc. (NYSE:WCN) is an integrated waste services provider in North America that specializes in waste collection, transfer, disposal, and recycling, primarily focusing on solid waste management. The company operates with a diverse portfolio of products and services tailored to meet the needs of residential, commercial, and industrial clients.
Its offerings include various dumpster rental sizes, waste management solutions for construction sites, and dedicated recycling programs aimed at promoting environmental responsibility. Over the years, the company has made strategic acquisitions to improve its services and geographic reach and has positioned itself as one of the largest players in the waste management industry in North America. It is one of the best low beta stocks to buy.
Waste Connections (NYSE:WCN) runs 71 recycling facilities dedicated to processing materials from consumers and assisting clients in achieving their diversion targets. In the year 2021, it managed the recycling of about 2 million tons of various materials, including fiber, metals, and plastics. Furthermore, it has implemented roughly 50 recycling robots in its operations and has positioned itself as an industry pioneer in automation.
In Q2, 50 hedge funds had positions worth over $1.5 billion in the company. As of June 30, Bill & Melinda Gates Foundation Trust is its biggest shareholder with 2.15 million shares, worth $376.879 million.
Waste Connections (NYSE:WCN) also returns a healthy amount to its shareholders through dividends and buybacks. While the company’s dividend yield of 0.64% is low compared to its sector, it has been raising its dividend for the last 7 years.
In addition, on August 8, the company announced that it had received approval from the Toronto Stock Exchange (TSX) to renew its normal course issuer bid (NCIB) following the expiration of the current NCIB on August 9, 2024. The renewed NCIB allows the company to buy back up to 12,901,981 common shares, representing 5% of its outstanding shares as of August 1, 2024.
Daily purchases on the TSX will be limited to 60,089 shares, or 25% of the average daily trading volume, with similar rules applying to the New York Stock Exchange (NYSE). The buyback program is authorized from August 12, 2024, to August 11, 2025.
TimesSquare Capital Management stated the following regarding Waste Connections, Inc. (NYSE:WCN) in its first quarter 2024 investor letter:
“Many of our Industrials positions provide necessary business-to-business operational services, highly technical components, automation & efficiency improvements, or essential infrastructure services. Adding value to the strategy was Waste Connections, Inc. (NYSE:WCN), which collects, transfers, recycles, and disposes of waste for municipalities and businesses in the U.S. and Canada. Revenues and earnings topped expectations, as did management’s initial guidance for 2024. The company projects near-term growth in volumes and pricing, which recent acquisitions should make more than likely. As Waste Connection’s shares climbed 15%, we trimmed our holdings.”
Overall WCN ranks 3rd on our list of the best low beta stocks to buy. While we acknowledge the potential of WCN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is promising and trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.