WM Short Interest Climbs, But Peers Carry More Pressure

Waste Management sits at the lighter end of bearish positioning within its peer group, even as its own short interest has hit a new high for the year.

Among WM's closest correlated names, WCN and CWST both carried stronger price momentum this week, up 11.7% and 12.0% respectively, suggesting capital has rotated more aggressively toward those names. RSG gained 5.3% on the week, roughly in line with WM's 5.5% move. WM's short interest at 1.96% of free float is modest by any standard, but it is the highest the stock has seen in at least a year, having climbed roughly 45% from late September levels of around 5.4 million shares to just under 7.9 million now.

That build in short interest has not translated into any real stress in the lending market. Availability is essentially uncapped, with shares-available-to-borrow running at roughly 100 times the amount currently lent out. Borrowing costs have eased sharply, falling 35% over the past week to 0.32%, which is the lowest level in the period covered by the data. The options market tells a similar story: the put/call ratio at 0.54 is actually running below its 20-day average of 0.60, meaning the defensive hedging that was evident in September has unwound. Positioning, in aggregate, looks more relaxed than the short interest headline implies.

The picture on analyst sentiment has shifted since the previous note on this stock. Both Morgan Stanley and JP Morgan trimmed targets ahead of the October 27 print, moves that have been partially offset by the stock's rally from around $212 to $239. At $239, WM now trades above JP Morgan's revised $235 target, and within striking distance of Morgan Stanley's $220 floor. The Street mean target of $253.52 still offers modest upside from current levels, but the gap has narrowed considerably as the stock has re-rated higher over the past month, up 15%.

The October 27 print will test whether the recovery in WM's share price since the analyst target cuts is supported by evidence of improving volume trends, specifically the special waste backlogs and construction-and-demolition activity the company flagged as early indicators of a stronger second half, or whether the move has run ahead of the underlying operational story.