Top Stock Picks for 2023: Waste Management

An unwinding of pessimism amongst analysts and options traders could provide tailwinds

Managing Editor
Jan 13, 2023 at 12:00 PM
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Subscribers to Chart of the Week received this commentary on Sunday, January 8.

In the last quarter of 2022, Waste Management Inc (NYSE:WM) stock broke a technical downtrend and retested that level before advancing. WM is now back above its 100-day moving average, just off all-time levels, and has been a steady uptrend over essentially any timeframe you select. For example, the shares are above their year-to-date breakeven while the SPDR S&P 500 ETF Trust (SPY) is off 16% in 2022, while their year-over-year breakeven remains positive compared to the SPY’s 13% 12-month haircut. Going back even further, WM’s three-year tally checks in at 54%, compared to the SPY’s 32% gain. 

CotW Repost WM Jan13

Despite this outperformance, put traders won’t give up. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.50 sits higher than 71% of readings from the past year. Echoing this, WM’s Schaeffer's put/call open interest ratio (SOIR) of 1.09 ranks higher than 67% of annual readings, meaning short-term traders remain quite put-biased. Digging deeper, five of the top open interest positions are puts.

WM is approaching its 12-month consensus price target of $174, and could see revisions or upgrades higher, especially considering seven of the 11 brokerages maintain tepid “hold” stances. And among short sellers, bearish bets have increased by 32% in the last four months, all while WM has rallied, hinting at the technical strength of the stock.

Even further supporting our case, Friday afternoon WM was seen trading up 2.9% at $158.24, after several brokerages moved in with fresh bull notes. Raymond James approached with an “outperform” rating, Jefferies upgraded to a “buy” from “hold,” and both Citigroup and Citibank set “buy” recommendations, with the latter citing WM as an underappreciated natural gas opportunity. In other words: jump on board the Waste Management train, as there remains ample buying opportunity for bulls in the weeks ahead!

 

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