Were Hedge Funds Right About Waste Connections, Inc. (WCN)?

Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value 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 Connections, Inc. (NYSE:WCN) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Waste Connections, Inc. (NYSE:WCN) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 32 hedge funds’ portfolios at the end of the third quarter of 2021. Our calculations also showed that WCN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare WCN to other stocks including CBRE Group, Inc. (NYSE:CBRE), Affirm Holdings, Inc. (NASDAQ:AFRM), and Verisk Analytics, Inc. (NASDAQ:VRSK) to get a better sense of its popularity.

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. With all of this in mind we’re going to go over the new hedge fund action surrounding Waste Connections, Inc. (NYSE:WCN).

Paul Marshall of Marshall Wace

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

At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 32 hedge funds held shares or bullish call options in WCN a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the largest position in Waste Connections, Inc. (NYSE:WCN), worth close to $132.8 million, corresponding to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Greg Poole of Echo Street Capital Management, with a $120.7 million position; 0.8% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish include Renaissance Technologies, James Parsons’s Junto Capital Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Galibier Capital Management allocated the biggest weight to Waste Connections, Inc. (NYSE:WCN), around 7.04% of its 13F portfolio. Bishop Rock Capital is also relatively very bullish on the stock, dishing out 5.25 percent of its 13F equity portfolio to WCN.

Because Waste Connections, Inc. (NYSE:WCN) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there is a sect of hedgies that slashed their entire stakes in the third quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management dropped the largest position of the 750 funds tracked by Insider Monkey, valued at about $3.4 million in stock, and Mark Coe’s Coe Capital Management was right behind this move, as the fund cut about $2.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Waste Connections, Inc. (NYSE:WCN). We will take a look at CBRE Group, Inc. (NYSE:CBRE), Affirm Holdings, Inc. (NASDAQ:AFRM), Verisk Analytics, Inc. (NASDAQ:VRSK), EPAM Systems Inc (NYSE:EPAM), Nasdaq, Inc. (NASDAQ:NDAQ), Cummins Inc. (NYSE:CMI), and Barrick Gold Corporation (NYSE:GOLD). This group of stocks’ market valuations match WCN’s market valuation.

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As you can see these stocks had an average of 33.6 hedge funds with bullish positions and the average amount invested in these stocks was $1311 million. That figure was $786 million in WCN’s case. EPAM Systems Inc (NYSE:EPAM) is the most popular stock in this table. On the other hand Nasdaq, Inc. (NASDAQ:NDAQ) is the least popular one with only 21 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 55.8. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market again by 3.6 percentage points. Unfortunately, WCN wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); WCN investors were disappointed as the stock returned -0.8% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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