Is Waste Connections, Inc. (NYSE:WCN) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Hedge fund interest in Waste Connections, Inc. (NYSE:WCN) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Verisign, Inc. (NASDAQ:VRSN), Baker Hughes, a GE company (NYSE:BHGE), and MPLX LP (NYSE:MPLX) to gather more data points. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most stock holders, hedge funds are viewed as unimportant, old investment tools of the past. While there are greater than 8000 funds in operation at present, Our experts hone in on the elite of this group, approximately 750 funds. These money managers direct most of all hedge funds' total asset base, and by following their finest investments, Insider Monkey has found many investment strategies that have historically surpassed the broader indices. Insider Monkey's flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points annually 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. We're going to review the recent hedge fund action surrounding Waste Connections, Inc. (NYSE:WCN).
How are hedge funds trading Waste Connections, Inc. (NYSE:WCN)?
At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in WCN a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Waste Connections, Inc. (NYSE:WCN), with a stake worth $153.7 million reported as of the end of March. Trailing Renaissance Technologies was Samlyn Capital, which amassed a stake valued at $38.8 million. Osterweis Capital Management, GAMCO Investors, and Echo Street Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Because Waste Connections, Inc. (NYSE:WCN) has witnessed a decline in interest from the smart money, logic holds that there lies a certain "tier" of hedge funds that decided to sell off their positions entirely in the second quarter. Intriguingly, Lee Ainslie's Maverick Capital dropped the largest stake of the "upper crust" of funds monitored by Insider Monkey, worth close to $45 million in stock. Jos Shaver's fund, Electron Capital Partners, also dumped its stock, about $18.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Waste Connections, Inc. (NYSE:WCN) but similarly valued. These stocks are Verisign, Inc. (NASDAQ:VRSN), Baker Hughes, a GE company (NYSE:BHGE), MPLX LP (NYSE:MPLX), and Global Payments Inc (NYSE:GPN). This group of stocks' market valuations are closest to WCN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VRSN,32,6013225,1 BHGE,18,337104,-5 MPLX,11,511213,1 GPN,37,1255484,8 Average,24.5,2029257,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $2029 million. That figure was $430 million in WCN's case. Global Payments Inc (NYSE:GPN) is the most popular stock in this table. On the other hand MPLX LP (NYSE:MPLX) is the least popular one with only 11 bullish hedge fund positions. Waste Connections, Inc. (NYSE:WCN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 WCN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WCN were disappointed as the stock returned -3.6% 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 so far this year.
Disclosure: None. This article was originally published at Insider Monkey.