We recently published a list of 10 Best Water Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Waste Management, Inc. (NYSE:WM) stands against other best water stocks to buy according to hedge funds.
The water business in the USA is a diverse sector that includes various activities necessary for the development of urban and rural communities. Public utilities are the backbone of this industry – hundreds of public services offer ordinary, everyday water supply and wastewater treatment services to millions of homes and businesses. Such organizations provide the source, treatment, and distribution of potable water, in addition to wastewater collection and treatment to meet environmental standards. Beyond the realm of public utilities, the water industry includes private companies whose expertise is focused on water infrastructure engineering, consulting, and construction. These companies often collaborate with government agencies to modernize aging water systems and implement sustainable solutions, meaning that a significant portion of the water management market is financed from public budgets. They also provide cutting-edge technologies for water purification, desalination, and leak detection, which play a crucial role in improving the efficiency and reliability of water systems.
Several trends and tailwinds are currently shaping the water business in the USA and the rest of the world. One of the most significant trends is the increasing focus on sustainable water management practices due to growing concerns about water scarcity and climate change. Smart water grids and modern metering infrastructure are some of the inventive interventions being implemented to help make water use more efficient and also cut losses. The emergence of digital technologies such as IoT and AI is disrupting the status quo, providing new ways for water utilities to monitor and manage their operations, allowing for real-time data collection and analysis followed by predictive maintenance – this will not only help make water consumption more sustainable, but may also provide significant opportunities for profitability expansion by cutting some operational costs. Another significant trend is the rising investment in water infrastructure, fueled by government initiatives and public-private partnerships aimed at upgrading aging water systems and expanding access to clean water.
From an investment perspective, the future of the water business in the USA looks bright, with several factors contributing to its potential growth. First, there’s an increasing demand for clean and safe water, which is primarily driven by population growth and urbanization. This issue presents substantial opportunities for water treatment companies and distributors. Moreover, the increasing awareness and focus on the environmental and sustainability aspect of the operations, primarily caused by regulatory requirements, are likely to fuel demand for innovative water management solutions and sustainable practices. Investors are particularly interested in the water solutions sector due to its incredible resiliency during recessionary periods; as many water-related projects are sponsored by public budgets, companies exposed to water operations usually have a low equity beta, meaning that they are likely to outperform the broad market during bearish periods. This feature is particularly attractive during stock market peaks – the US equity market is currently near its all-time highs, all while the actions of the new Trump 2.0 regime are starting to cause cracks in the outlook of businesses and consumers. With many surveys and intelligence agencies reporting a sentiment change towards more pessimistic scenarios, as well as significant cuts in the outlook for capital spending by private entities, water-related businesses may become more favored in the eyes of the “smart money”. In view of this, we will take a look at some of the best water stocks to buy now.
Our Methodology
We used the Insider Monkey proprietary hedge fund holding database and identified the 10 most popular water companies, ranked by the number of hedge funds which own the stock.
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 373.4% since May 2014, beating its benchmark by 218 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)
Number of Hedge Fund Holders: 67
Waste Management, Inc. (NYSE:WM) is North America’s largest provider of waste collection, recycling, and disposal services, catering to residential, commercial, and industrial customers. Based in Houston, Texas, the company operates an extensive network of landfills, recycling centers, and transfer stations, playing a critical role in sustainable waste management. While primarily focused on solid waste, WM is also involved in environmental services, including wastewater treatment and landfill gas-to-energy projects. By integrating advanced technologies and sustainability initiatives, the company aims to reduce environmental impact, enhance recycling efficiency, and support a circular economy, including in the water operations.
Waste Management, Inc. (NYSE:WM) is demonstrating strong financial performance with projected 16-17% revenue growth, 15% EBITDA growth, and 17-18% free cash flow growth for 2025. The company’s core solid waste business is showing robust performance with strong price conversion and optimization execution, generating around 7% organic growth. The company has made significant progress in reducing SG&A costs to sub-10% of revenue through technology implementation, discipline, and cultural changes, and has invested $1.4 billion in recycling infrastructure improvements, which has resulted in reduced operating costs and improved productivity through automation.
Waste Management, Inc. (NYSE:WM)’s recent acquisition of Stericycle positions it as a leader in medical waste, with doubled synergy targets of $250 million and expectations to reduce SG&A to 15% of revenue over three years. The company achieved 30% margins for the first time in its history in 2024 and expects to approach 50% long-term conversion of EBITDA to free cash flow. Customers are increasingly demanding sustainable and environmentally friendly services, driving demand for WM’s recycling and renewable natural gas offerings, which includes water-related projects.
Overall, WM ranks 2nd on our list of best water stocks to buy according to hedge funds. 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 time frame. If you are looking for an AI stock that is more promising than WM but that 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.
