Investing in Waste Management

Jul 7th, 2008 | By Jim Nelson | Category: Investing Strategies

“On a human level, the garbage man is just as important as the teacher or a rock star or a president, because you have to have them. The world would have been dead a long time ago without garbage men.”

— Herbie Hancock

In a world full of lawyers, brokers, accountants and any other white-collar profession you can think of, we sometimes forget about the miners, brick makers and garbage men. But without people doing these jobs, our world would be dead, as Herbie puts it.

You probably hear it once a week… The sound of a diesel engine, the loud reverse beeps, and the crash of a dumpster being unloaded on to the back of the massive garbage truck. That’s the sound of you cashing in….

The waste management industry here in the U.S. is a $50 billion-per-year operation. We throw away over 200 million tons of solid waste every year, or 4.4 pounds per person per day. That’s a lot of trash, and it costs a lot of money to get rid of it.

Now with gas prices hitting new highs weekly, many waste collection companies are now implementing fuel surcharges. The costs are passed on to you.

But waste collection alone isn’t necessarily the best place to put your money. You see, even they are paying more. Gas prices aren’t the only cost going up.

There are fewer and fewer places to put all this trash. So even with a recent surge of recycling, if you own a landfill, you are probably making a killing. It costs waste removal companies anywhere from $45 to $125 per ton to unload it at a landfill. That works out to between $27 to $75 per cubic yard of airspace. That’s an awful lot for a cubic yard of air just to store your trash, but waste removal companies have to pay it.

Today, we have the one company that can take advantage of these high prices. But before we get into to that, there is an important reason why you should invest in garbage now…

Get Paid in Bad Markets

As you have heard again and again, during recessions, people stop spending money when it isn’t absolutely necessary. But no matter how bad this year turns out to be for many stocks, waste management companies will still get theirs…

Just look in your kitchen cabinets right now. We’re sure you have tons of cereal boxes, soup cans, and plenty more packages of this and that. All of it will soon be trash. Everyone’s kitchen looks like that. No matter how depressed the housing situation gets or how low the stock market may go, we still go through a bunch of trash.

Let’s take a look at the last major recession and what happened to the industry leader, Waste Management, Inc. (WMI: NYSE):

Between 1990 and the first half of 1991, the market fell flat. But as you can see, Waste Management, Inc., which was similar to the size of our company today, took off. Investors recorded 800% profits, while everyone else in the market got crushed.

So even if we head into recession, waste management is still the place to be…

Sincerely,

Jim Nelson
July 7, 2008

P.S.: Today, we found one of the few stocks that can climb no matter what. This gem has the best-looking multiples in the waste management industry, on top of stellar growth. While it may not become as big as Waste Management, Inc., it can still have you rolling in the dough in no time.

Jim Nelson

Jim Nelson is the managing editor of Penny Sleuth. He has been playing the stock market since he was 14, always with a preference toward smaller companies. He has honed his stock picking skills at Agora Financial since 2004, effectively combining a growth and value approach. Like Greg Guenthner, Jim also contributes to Penny Stock Fortunes on top of bringing you the Penny Sleuth every weekday.

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