John Buckingham is a leading money manager, best known for his expertise in value investing; he is a...
Waste: An All-Weather Industry
09/13/2019 5:00 am EST
Although the bull market in stocks is almost certainly drawing to a close — and the economy is slowing down — there are still investments available that have excellent long-term outlooks, explains Jim Powell, editor of Global Changes & Opportunities Report.
The best of them are in basic industries that people and businesses must use no matter what the economic conditions happen to be. The list includes healthcare, food and agriculture, and personal hygiene — to name only three.
One basic services sector that investors often overlook is waste disposal. The product smells, it isn’t sexy, and people don’t enjoy talking about it. However waste disposal is very profitable.
It is also a good all-weather industry. As an analyst told me several years ago, “Many people go for years without seeing a doctor. But they can’t do without their garbage service for more than two or three weeks.”
In the US, the top waste disposal company is Waste Management (WM) that serves the needs of residential, commercial, industrial, and municipal customers around the country. The company operates using its own name — and also does business through hundreds of local companies in towns and cities from coast to coast.
In addition, Waste Management also sells enough landfill gas (methane) to power nearly 500,000 homes. As you might expect, the company is also a recycling leader. Because there are so many different waste disposal companies, it would be natural to assume that Waste Management suffers from too much competition.
However, collecting refuse isn’t the company’s principal business. Instead, Waste Management operates 254 licensed landfills in the US, plus hundreds of transfer stations.
Nearly all of Waste Management’s apparent competition must use the company’s disposal sites — for which they pay significant fees. In short, it’s the landfill business that matters, and Waste Management is the dominant player.
Because of its quasi-monopoly position in its industry, Waste Management has been able to steadily increase its dumping charges for many years — a period that includes the Great Recession.
There is every reason to think the company will be able to keep growing its bottom line for as far ahead as any of us can see. I think Waste Management is a good choice for conservative investors who want a proven long-term performer.
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