Waste Management (NYS: WM) isn't just the industry leader in dumping garbage. It's also the nation's largest recycler, an innovator in generating renewable energy, and the owner of 271 landfills and 107 recycling facilities as of the end of 2011. Here are some recent stats for North America's self-proclaimed leading provider of integrated environmental solutions:
CAPS Rating (out of 5)
Source: Yahoo! Finance.
It's been a somewhat volatile year for Waste Management's investors, up almost 10% at one point and currently down 0.34%. The drop happened in April when the company reported first-quarter financials. Revenue was up, but earnings per share were lower than expected. The company expected this hit, though, due to higher gas prices and lower commodity costs. It's still a great potential investment for your portfolio, and here are three great reasons.
The average American produces 1,600 pounds of trash each year and is accustomed to having somebody in a truck take it away for them. Our garbage habits and expectations are unlikely to change anytime in the near future. Because of this, companies like Waste Management are a necessity. This makes it a fairly recession-proof stock, as the stock's positive performance during the bear-market year of 2008 shows.
2. Industry leader
For an industry that's such a necessity, investors might wonder why there are only a few big players out there. The main reason is that this type of business is very capital-intensive to start up, and scale is important.
On the garbage hauling side, the larger a company is, the cheaper it is to get trucks out to you, which means the company can afford to offer more attractive prices in contract bids. On the disposal side, running facilities to sort garbage and recyclables, and even transform them into a renewable source of energy, is expensive.
Waste Management is the industry leader with a $15 billion market cap, bigger than that of both its largest competitors combined: Republic Services (NYS: RSG) has a roughly $10 billion market cap, and Waste Connections (NYS: WCN) weighs in at about $3.75 billion. Size matters in this industry, and Waste Management has the definite advantage.
Waste Management calls itself a provider of integrated environmental solutions. It does more than just haul and dispose of your garbage and recyclables. New technology is allowing the company (as well as its competitors) to explore methods of converting methane gas into electricity. This could end up providing the industry with an entirely new source of revenue, which would be good news for its already happy investors.
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The article 3 Reasons to Buy Waste Management originally appeared on Fool.com.
Fool contributor Amanda Buchanan owns shares of Waste Management, but she holds no other position in any company mentioned. Click here to see her holdings. The Motley Fool owns shares of Waste Management. Motley Fool newsletter services have recommended buying shares of Waste Management and Republic Services, as well as writing a covered strangle position on Waste Management. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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