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Waste Connections, Inc. (WCN) vs. Top 20 Hedge Fund Stocks in 2019

Nina Todic

Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before 2018's Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Waste Connections, Inc. (NYSE:WCN) changed recently.

Is Waste Connections, Inc. (NYSE:WCN) ready to rally soon? Investors who are in the know are getting more bullish. The number of bullish hedge fund positions improved by 3 recently. Our calculations also showed that WCN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). WCN was in 29 hedge funds' portfolios at the end of September. There were 26 hedge funds in our database with WCN holdings at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_256989" align="aligncenter" width="450"] Dmitry Balyasny of Balyasny Asset Managemnet[/caption]

Dmitry Balyasny of Balyasny Asset Managemnet

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind let's analyze the key hedge fund action regarding Waste Connections, Inc. (NYSE:WCN).

What does smart money think about Waste Connections, Inc. (NYSE:WCN)?

Heading into the fourth quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WCN over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in Waste Connections, Inc. (NYSE:WCN), which was worth $148 million at the end of the third quarter. On the second spot was Waratah Capital Advisors which amassed $111.6 million worth of shares. Balyasny Asset Management, Osterweis Capital Management, and Two Sigma Advisors 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 Waratah Capital Advisors allocated the biggest weight to Waste Connections, Inc. (NYSE:WCN), around 11.2% of its 13F portfolio. SAYA Management is also relatively very bullish on the stock, setting aside 7.63 percent of its 13F equity portfolio to WCN.

As one would reasonably expect, some big names have jumped into Waste Connections, Inc. (NYSE:WCN) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, created the biggest position in Waste Connections, Inc. (NYSE:WCN). Balyasny Asset Management had $33.3 million invested in the company at the end of the quarter. Curtis Schenker and Craig Effron's Scoggin also initiated a $2.8 million position during the quarter. The other funds with new positions in the stock are Sander Gerber's Hudson Bay Capital Management, Paul Marshall and Ian Wace's Marshall Wace, and Renee Yao's Neo Ivy Capital.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Waste Connections, Inc. (NYSE:WCN) but similarly valued. We will take a look at PACCAR Inc (NASDAQ:PCAR), Xilinx, Inc. (NASDAQ:XLNX), Ball Corporation (NYSE:BLL), and Baker Hughes, a GE company (NYSE:BHGE). All of these stocks' market caps are closest to WCN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PCAR,25,193757,-2 XLNX,38,1040263,-1 BLL,28,556069,1 BHGE,33,954876,15 Average,31,686241,3.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $686 million. That figure was $575 million in WCN's case. Xilinx, Inc. (NASDAQ:XLNX) is the most popular stock in this table. On the other hand PACCAR Inc (NASDAQ:PCAR) 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. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately WCN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WCN investors were disappointed as the stock returned 23.2% in 2019 and trailed 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 65 percent of these stocks already outperformed the market in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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