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3 Reasons to Buy Waste Management

Waste Management (NYSE: 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:

52-Week High $36.85
52-Week Low $27.75
Market Cap $15 billion
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.

1. Necessity
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 (NYSE: RSG  ) has a roughly $10 billion market cap, and Waste Connections (NYSE: WCN  ) weighs in at about $3.75 billion. Size matters in this industry, and Waste Management has the definite advantage.

3. Innovation
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.

Waste Management is an overall great company and investment, and I'm not the only Fool who thinks so. Our newsletters have recommended the company, too. But The Motley Fool has another company that they think is really set to pop this year -- a retail company changing the way people shop in Latin America that'd make a great addition to any portfolio. To read all about our top stock for 2012, just click here.

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.

Read/Post Comments (1) | Recommend This Article (6)

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  • Report this Comment On July 26, 2012, at 9:01 AM, snickerdoodle9 wrote:

    I bought Waste Management ( WM ) about 6 months or more ago . This great well run company was recommended as a buy from " stick with Cramer " Jim Cramer . As always I do the research before deciding on purchasing recommendations from the experts and analysts . Waste Management is by far one of the best of many of my dividend paying holdings ;-) !

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Related Tickers

10/24/2016 4:03 PM
WM $62.58 Up +0.37 +0.59%
Waste Management CAPS Rating: *****
RSG $50.55 Up +0.62 +1.24%
Republic Services CAPS Rating: *****
WCN $74.89 Up +0.53 +0.71%
Waste Connections CAPS Rating: **