Was The Smart Money Right About Waste Management, Inc. (WM)?

Technology stocks had a lousy start to 2022. QQQ lost 9% of its value in January. Pandemic winners are getting crushed while energy stocks are surging. Roblox lost 36%, Moderna lost 33%, and Carvana and Shopify lost 30% of their values in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Waste Management, Inc. (NYSE:WM) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Is Waste Management, Inc. (NYSE:WM) a bargain? The best stock pickers were reducing their bets on the stock. The number of bullish hedge fund bets were cut by 3 lately. Waste Management, Inc. (NYSE:WM) was in 36 hedge funds’ portfolios at the end of September. 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 Q3 rankings). There were 39 hedge funds in our database with WM holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now we’re going to take a gander at the new hedge fund action regarding Waste Management, Inc. (NYSE:WM).

Joel Greenblatt of Gotham Asset Management

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

At the end of the third quarter, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WM over the last 25 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

More specifically, Bill & Melinda Gates Foundation Trust was the largest shareholder of Waste Management, Inc. (NYSE:WM), with a stake worth $2783.1 million reported as of the end of September. Trailing Bill & Melinda Gates Foundation Trust was Impax Asset Management, which amassed a stake valued at $393.4 million. AQR Capital Management, Locust Wood Capital Advisers, and Millennium Management 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 Bill & Melinda Gates Foundation Trust allocated the biggest weight to Waste Management, Inc. (NYSE:WM), around 12% of its 13F portfolio. Locust Wood Capital Advisers is also relatively very bullish on the stock, setting aside 4.15 percent of its 13F equity portfolio to WM.

Because Waste Management, Inc. (NYSE:WM) has experienced a decline in interest from hedge fund managers, it’s safe to say that there was a specific group of fund managers that decided to sell off their entire stakes in the third quarter. It’s worth mentioning that John Overdeck and David Siegel’s Two Sigma Advisors dropped the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth an estimated $79.4 million in stock, and Zilvinas Mecelis’s Covalis Capital was right behind this move, as the fund dropped about $8.9 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Waste Management, Inc. (NYSE:WM). These stocks are Autodesk, Inc. (NASDAQ:ADSK), Banco Santander, S.A. (NYSE:SAN), VMware, Inc. (NYSE:VMW), Workday Inc (NASDAQ:WDAY), Boston Scientific Corporation (NYSE:BSX), Activision Blizzard, Inc. (NASDAQ:ATVI), and Stellantis N.V. (NYSE:STLA). This group of stocks’ market caps match WM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 46 hedge funds with bullish positions and the average amount invested in these stocks was $2632 million. That figure was $3629 million in WM’s case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand Banco Santander, S.A. (NYSE:SAN) is the least popular one with only 14 bullish hedge fund positions. Waste Management, Inc. (NYSE:WM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WM is 39.4. 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 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on WM as the stock returned 1.1% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.

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