Is WM Stock A Buy or Sell?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Waste Management, Inc. (NYSE:WM).

Is WM stock a buy? Waste Management, Inc. (NYSE:WM) investors should pay attention to a decrease in support from the world’s most elite money managers of late. Waste Management, Inc. (NYSE:WM) was in 37 hedge funds’ portfolios at the end of the fourth quarter of 2020. 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 Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

David Siegel of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 website. Keeping this in mind we’re going to analyze the key hedge fund action encompassing Waste Management, Inc. (NYSE:WM).

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

At the end of the fourth quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the third quarter of 2020. On the other hand, there were a total of 32 hedge funds with a bullish position in WM a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Waste Management, Inc. (NYSE:WM) was held by Bill & Melinda Gates Foundation Trust, which reported holding $2197.5 million worth of stock at the end of December. It was followed by Impax Asset Management with a $234.9 million position. Other investors bullish on the company included AQR Capital Management, Two Sigma Advisors, and GLG Partners. 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 9.84% of its 13F portfolio. Locust Wood Capital Advisers is also relatively very bullish on the stock, designating 2.55 percent of its 13F equity portfolio to WM.

Judging by the fact that Waste Management, Inc. (NYSE:WM) has witnessed a decline in interest from hedge fund managers, logic holds that there exists a select few money managers who were dropping their entire stakes in the fourth quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the biggest position of all the hedgies monitored by Insider Monkey, worth an estimated $42.2 million in stock, and Robert Pohly’s Samlyn Capital was right behind this move, as the fund cut about $30.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds in the fourth quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Waste Management, Inc. (NYSE:WM) but similarly valued. These stocks are Koninklijke Philips NV (NYSE:PHG), Bank of Montreal (NYSE:BMO), Monster Beverage Corp (NASDAQ:MNST), Honda Motor Co Ltd (NYSE:HMC), America Movil SAB de CV (NYSE:AMX), Aon plc (NYSE:AON), and Prudential Public Limited Company (NYSE:PUK). This group of stocks’ market caps match WM’s market cap.

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As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $1329 million. That figure was $2938 million in WM’s case. Aon plc (NYSE:AON) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 2 bullish hedge fund positions. Waste Management, Inc. (NYSE:WM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WM is 54. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on WM as the stock returned 10.1% since the end of Q4 (through 4/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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