You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is Waste Management, Inc. (NYSE:WM) undervalued? The best stock pickers are becoming more confident. The number of long hedge fund bets inched up by 2 in recent months. Our calculations also showed that WM isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most market participants, hedge funds are assumed to be underperforming, outdated financial tools of yesteryear. While there are more than 8000 funds with their doors open today, Our researchers choose to focus on the bigwigs of this club, around 750 funds. It is estimated that this group of investors shepherd the lion’s share of the hedge fund industry’s total asset base, and by observing their finest stock picks, Insider Monkey has formulated a few investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the latest hedge fund action regarding Waste Management, Inc. (NYSE:WM).
How have hedgies been trading Waste Management, Inc. (NYSE:WM)?
Heading into the third quarter of 2019, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. By comparison, 36 hedge funds held shares or bullish call options in WM a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing 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 $2149.8 million reported as of the end of March. Trailing Bill & Melinda Gates Foundation Trust was AQR Capital Management, which amassed a stake valued at $469.5 million. Impax Asset Management, Adage Capital Management, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key money managers have been driving this bullishness. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, assembled the largest position in Waste Management, Inc. (NYSE:WM). Senator Investment Group had $79 million invested in the company at the end of the quarter. Ben Gambill’s Tiger Eye Capital also made a $13.1 million investment in the stock during the quarter. The following funds were also among the new WM investors: Dmitry Balyasny’s Balyasny Asset Management, Richard Chilton’s Chilton Investment Company, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Waste Management, Inc. (NYSE:WM) but similarly valued. We will take a look at America Movil SAB de CV (NYSE:AMX), Suncor Energy Inc. (NYSE:SU), Illinois Tool Works Inc. (NYSE:ITW), and Bank of Montreal (NYSE:BMO). All of these stocks’ market caps are closest to WM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMX | 9 | 188315 | -5 |
| SU | 32 | 1296788 | -1 |
| ITW | 28 | 306050 | 1 |
| BMO | 13 | 292499 | -2 |
| Average | 20.5 | 520913 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $521 million. That figure was $3416 million in WM’s case. Suncor Energy Inc. (NYSE:SU) is the most popular stock in this table. On the other hand America Movil SAB de CV (NYSE:AMX) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Waste Management, Inc. (NYSE:WM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately WM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WM were disappointed as the stock returned 0.1% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
