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 Management, Inc. (NYSE:WM) 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).
Aerial view of a Waste Management Transfer Station, highlighting the scale of its operations.
Waste Management, Inc. (NYSE:WM)
5-year Beta (monthly): 0.75
Number of Hedge Fund Holders: 49
Waste Management, Inc. (NYSE:WM) is a provider of comprehensive waste management and environmental services in North America. The company primarily generates revenue through waste collection, which involves picking up and transporting waste to transfer stations, material recovery facilities, or landfills, with about 70% of collected waste processed at its landfills. It is the 5th best low beta stock on our list.
According to the company’s 2024 sustainability report, it is investing over $2.8 billion from 2022 to 2026 in sustainability growth initiatives. The company has established a sustainability strategy focused on three main ambitions, including repurposing materials, promoting renewable energy, and fostering thriving communities.
In 2023, Waste Management (NYSE:WM) made significant strides, adding more than 875,000 tons of recycling capacity, recovering over 15 million tons of material, and generating over 56 million MMBtus of renewable energy from captured landfill gas. Additionally, the company impacted over 525,000 individuals through targeted social programs and donated nearly $18.7 million to charitable causes.
Waste Management (NYSE:WM) is currently pursuing the acquisition of Stericycle, a medical waste collection and disposal company. The acquisition will allow the company to advance its service offerings and sustainability efforts, as Stericycle’s waste management services complement WM’s strengths. It plans to use technology to improve customer value and lower costs, estimating over $125 million in annual savings from better operations and logistics.
WM will pay $62 per share, which is a 24% premium, bringing the total value of the deal to $7.2 billion. Stericycle’s revenue is expected to grow at an annual rate of 3% to 5% from 2023 to 2027. The deal should add to the company’s earnings and cash flow within a year. The deal is expected to close in the fourth quarter of 2024, pending regulatory approvals and shareholder agreement.
In the second quarter, Waste Management’s (NYSE:WM) stock was held by 49 hedge funds, at a combined value of $8.7 billion. With 35.234 million shares, worth $7.5 billion, Bill & Melinda Gates Foundation Trust is the most dominant shareholder of the company, as of June 30.
Overall WM ranks 5th on our list of the best low beta stocks to buy. While we acknowledge the potential of WM 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.