Should I Avoid Waste Connections, Inc. (WCN)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Waste Connections, Inc. (NYSE:WCN) based on that data.

Waste Connections, Inc. (NYSE:WCN) was in 31 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 39. WCN investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. There were 35 hedge funds in our database with WCN holdings at the end of December. Our calculations also showed that WCN isn’t among the 30 most popular stocks among hedge funds (click for Q1 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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Donald Sussman of Paloma Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s review the fresh hedge fund action regarding Waste Connections, Inc. (NYSE:WCN).

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

Heading into the second quarter of 2021, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WCN over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Echo Street Capital Management held the most valuable stake in Waste Connections, Inc. (NYSE:WCN), which was worth $112.4 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $109.3 million worth of shares. Renaissance Technologies, Skye Global Management, and D E Shaw 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 Galibier Capital Management allocated the biggest weight to Waste Connections, Inc. (NYSE:WCN), around 6.88% of its 13F portfolio. Bishop Rock Capital is also relatively very bullish on the stock, designating 5.06 percent of its 13F equity portfolio to WCN.

Judging by the fact that Waste Connections, Inc. (NYSE:WCN) has experienced declining sentiment from the smart money, logic holds that there lies a certain “tier” of funds who were dropping their full holdings last quarter. At the top of the heap, Paul Tudor Jones’s Tudor Investment Corp cut the largest investment of the 750 funds watched by Insider Monkey, totaling an estimated $3.8 million in stock, and Bernard Lambilliotte’s Ecofin Ltd was right behind this move, as the fund said goodbye to about $3.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Waste Connections, Inc. (NYSE:WCN). These stocks are ResMed Inc. (NYSE:RMD), KKR & Co Inc. (NYSE:KKR), Old Dominion Freight Line, Inc. (NASDAQ:ODFL), Unity Software Inc. (NYSE:U), Ball Corporation (NYSE:BLL), Lennar Corporation (NYSE:LEN), and Teladoc Health, Inc (NYSE:TDOC). All of these stocks’ market caps are similar to WCN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.3 hedge funds with bullish positions and the average amount invested in these stocks was $2681 million. That figure was $822 million in WCN’s case. KKR & Co Inc. (NYSE:KKR) is the most popular stock in this table. On the other hand ResMed Inc. (NYSE:RMD) is the least popular one with only 25 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 overall hedge fund sentiment score for WCN is 34.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and beat the market by 6 percentage points. A small number of hedge funds were also right about betting on WCN, though not to the same extent, as the stock returned 11% since the end of Q1 (through July 2nd) and outperformed the market.

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