China continues to struggle with pollution as the 2008 Summer Olympics in Beijing approach. Even in the midst of some serious cleanup efforts, the World Health Organization reports that seven out of the 10 most polluted cities in the world are in China.

And as important as it is to reduce the smog that chokes many of China’s urban centers, consider the problems the nation faces with solid waste removal.

According to China.org, urban trash grew 4.8% annually. On top of this, only 20% of the garbage was treated, with the rest just piling up outside the country’s many big cities.

It gets worse… China produces garbage in the hundreds of millions of tons every year. And a lot of it was not properly disposed because the country lacks the proper facilities in many areas.

China isn’t the only country dealing with this problem…

While global warming and other pollution issues have been pushed to the forefront of American politics lately, we are experiencing many trash-related difficulties in the U.S., too.

Take New Orleans, for instance. The city is still reeling from the aftermath of Hurricane Katrina, all while local leaders are pushing hard for more tourists to pack the streets during Mardi Gras.

However, a new company has taken over cleaning duties in the French Quarter this year. Earlier in the year, the Wall Street Journal featured SDT Waste and Debris Services, a small private company founded by a local entrepreneur to fill the void in the industry left by Hurricane Katrina.

SDT is winning contracts with a new approach to waste management. Attractive uniforms, catchy commercials, flashy street sweepers and washers that spray pleasant fragrances like lemon and eucalyptus are some of the company’s fresh tactics.

Let’s face it: The garbage business is huge. The more messes we make, the more these guys will have to come to our rescue. The smaller companies that develop innovative new methods to clean our factories, cities and water stand to make investors a lot of money.

Here’s a look at how a few small-cap companies in the waste management industry have fared over the past year:

Perma-Fix Environmental Services, Inc. (PESI: NASDAQ) — Market cap: $148 million; recent price: $2.79.

Perma-Fix operates in three segments of the trash business: Industrial waste, nuclear waste and engineering consulting services. The company’s industrial branch includes hazardous, non-hazardous and wastewater processing and disposal. Its consulting arm includes air and soil sampling and environmental compliance services.

The stock is up more than 20% year to date.

Metal Management, Inc. (MM: NYSE) — Market cap: $1.25 billion; recent price: $49.26.

Metal Management recycles metal at 50 facilities across the country. The company collects obsolete industrial scrap metal, processes it, and sells to foundries and metal brokers. Interestingly enough, it also operates a bus-dismantling business.

So far this year, the stock is up over 26%.

Garbage stocks are cleaning up in big way…and the trend is just getting started. We’ll let you know when more develops.

Best,
Gunner
November 8, 2007

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Greg Guenthner

Greg Guenthner uses his experience as a former journalist to dig up the hard-to-find headlines that could lead to big gains for your micro-cap portfolio. Greg offers his readers the scoop on topics ranging from alternative energies to biotechnology, digging up the best penny stock opportunities before they’re discovered by the mainstream media. On top of contributing to Penny Sleuth, Greg also heads Penny Stock Fortunes and Bulletin Board Elite. Special Report: Imagine Getting Rich as Ignored Stocks Soar - You could turn $200 into $1.2 million!

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