Waste management companies make big $ hauling our refuse.
America’s #1 in a lot of categories we wish we weren’t. Homelessness, for-profit prison population, per capita medical debt, child gun-related deaths, car thefts, obesity, television consumption, credit card fraud, divorce, teenage pregnancy and cost of child birth.
So when it comes to producing trash, you’d think we’d be tops. But that honor belongs to our friendly neighbors to the north. Surprising, eh? America ranks third (behind Canada and Bulgaria) for per capita waste generation with 268 million tons annually.
If that seems like a lot of trash, it is. It’s 0.8 tons of garbage for every American man, woman and child. Every. Single. Year.
The issue obviously isn’t limited to Canadians, Bulgarians or Americans. The World Bank estimates that by 2050, waste generation will increase by as much as 70% from 2.01 billion tons to 3.4 billion tons. Put another way, that’s roughly double the pace at which Earth’s population will increase.
In America, as a percentage of what ends up in our landfills, food leads the way with 21.9% or 30.63 million tons annually. Embarrassing given how many food insecure citizens we have … 13.5 million at last count in case you’re wondering.
Totaling what ends up in landfills and what’s recycled, products and packaging account for 71% of America’s waste … not shocking for a populace as habituated to Amazon Prime and single-use products as Charlie Sheen was to cocaine and sex workers.
If the pandemic has taught us anything — aside from which anti-vax family members are no longer invited to Thanksgiving — it’s that we don’t properly acknowledge let alone celebrate society’s true heroes.
And given the amount of sh*t we put at the curb every single week in this country, those hauling it away deserve far more respect than they’re given.
Trash & Treasure
Like we do most weeks, we try to find investable opportunities in what can otherwise be described as harrowing situations. So, when life gives you overripened lemons, rather than throwing them away, make lemonade.
The business of waste management is incredibly lucrative. While your immediate thoughts might jump to certain disreputable Italian Americans in North Jersey and the 21 Emmy Awards the cast and crew of The Sopranos won in their six seasons mimicking them … there are numerous legal and extraordinarily profitable companies operating in the space.
In fact, waste management is such big business, the Dow Jones has a dedicated index tracking the sector: The Dow Jones U.S. Waste & Disposal Services Index.
And as we discussed two weeks ago, where there’s an index, there’s usually an exchange-traded fund tracking it: the VanEck Environmental Services ETF (EVX).
The EVX pays a dividend yielding 0.4%, but its expense ratio is 0.62%. And despite holding a basket of stocks that includes all three of the companies we’re going to profile today, for investors that prefer aiming to beat an index rather than mirror it, you might be interested in these …
3 Rulers of Refuse
Waste Management (WM) is the Nike of environmental solutions. Its services span residential, commercial, industrial and municipal applications in Canada and the U.S. The company was founded in 1968 by three men, one of whom was Wayne Huizenga, former owner of the Miami Marlins, Florida Panthers and Miami Dolphins.
Today, WM is the largest waste management company in the U.S. With 26k collection and transfer vehicles, the company has the largest trucking fleet in the industry. Its network includes 346 transfer stations, 293 active landfills, 146 recycling plants, 111 beneficial-use landfill gas projects and six independent power plants.
- Market cap: $64 billion
- Price-to-earnings ratio: 28.02
- Dividend yield: 1.8%
- Share price: $155.96
- Year-to-date gain/loss: -0.68%
- Five-year gain/loss: +84%
- Year established: 1968
If WM is the Nike of garbage, Republic Services (RSG) is the Reebok. The company offers collection and processing services for recycling, solid waste, industrial waste and hazardous waste. In 1981, Huizenga became chairman of the board.
RSG is the second largest waste management company in the U.S. Together with WM, the two companies handle more than half of all the garbage collection in America. RSG has operations in 40 states and Puerto Rico through 343 collection operations, 204 transfer stations, 195 active landfills, 90 recycling centers seven treatment and recovery facilities and 11 saltwater disposal wells.
- Market cap: $46 billion
- Price-to-earnings ratio: 29.08
- Dividend yield: 1.48%
- Share price: $144.42
- Year-to-date gain/loss: +12%
- Five-year gain/loss: +107%
- Year established: 1996
Lesser-known Clean Harbors (CLH) is not as big a player in the waste management industry as the aforementioned two, but it’s still a sizable company that’s a top-10 holding in the EVX. It provides its services in the U.S. and internationally. It doesn’t pay a dividend, but we included it on this list because of its exponential growth and share appreciation.
CLH owns and operates 400 service locations in North America, including over 50 hazardous waste management facilities in 38 states, seven Canadian providences, Mexico and Puerto Rico. Since 1989, it has acquired nine of its competitors.
- Market cap: $8.4 billion
- Price-to-earnings ratio: 20.79
- Dividend yield: N/A
- Share price: $155.33
- Year-to-date gain/loss: +37%
- Five-year gain/loss: 149%
- Year established: 1980
TL;DR
Global population is growing, and with it, so too will waste generation. By 2050, waste generation will increase by as much as 70%, doubling the pace of population growth. Waste management is lucrative and certain well-established companies are already positioned to continue dominating the space. One last thing. If you received this email from a friend, sign up here so you don’t miss any future issues.