The Most Disgusting Trend to Own in 2011

India, which will soon be the most populous nation on Earth, is prepared to support the rise of one massively profitable set of services that Americans have been enjoying for decades. Do you know which set?

It's not a set of regular consumer services, nor a grouping of luxury products. India -- my home for the present -- suffers from no shortage of either.

What India desperately needs right now is to clean itself up -- across the board. If it does, I envision a much, much better future for Indians and some very impressive returns for shareholders of select companies.

The dawn
One day, Indians are going to wake up to the fact that despite their emerging political and economic clout, most of their urban cityscapes are filthy. Walk down just an average street in a major city here and you inevitably stumble into heaping piles of trash and streams of urine pooling into mosquito-filled wastewater. It's disgusting.

 

Filth of various forms engulfs a bustling lower-income neighborhood in Mumbai. Photo by Nick Kapur.

Indians produce first-rate work in science, technology, medicine, business, and various other commercial and artistic fields. Yet the only way to describe the general sanitation situation in this country is Third (or Fourth) World. This particular deficiency spans the spectrum of basic civil services from trash removal and pest control to water and wastewater services.

State of the republic
India does not lack the money to better manage its own cleanliness. Between its elite classes and a government growing fat off of the broader economic success of a giant country, India can absolutely afford to clean things up. The issue is simply a cultural phenomenon.

The parking lot outside of a prized national monument in New Delhi. Photo by Nick Kapur.

For whatever reason, it's generally OK to litter in the streets, to pee on the sidewalk, and to do all sorts of things that are widely unacceptable by Western standards. And it's generally OK for the government to not do anything about it -- either to prevent it or to deal with it after. Everyone just seems to turn a blind eye. Walk into a nice restaurant, hotel, or golf club, however, and you'll strain to see even one stray piece of paper.

Reason has nothing to do with it
The irony is that most Indians abhor dirtiness. Many people here employ workers to mop floors and dust furniture in their homes on a seemingly hourly basis. Yet these same well-to-do individuals implicitly support the filth that exists in the public by not doing anything about it. In my opinion, there is no other way to explain it than an utter lack of civic responsibility.

The real problem is that the issue is only going to get worse unless it is dealt with directly. One estimate shows India's waste output more than tripling by 2030. My suspicion, based on ever-improving per-capita income ratios, is that this number is terribly low.

Fortunately, there are a few hints that things are beginning to turn around.

The catalyst
In 2010, New Delhi played host to the spectacle of the Commonwealth Games, an event that helped transform the city from a nauseatingly polluted metropolis with terrible infrastructure to a relatively well-functioning capital in a remarkably short period of time. While much work remains, the city has made several giant strides forward -- all thanks to one very powerful tool: embarrassment.

Embarrassment (or at least the threat of it) has been crucial in developing small portions of this vast country. Therefore, I believe I have identified a very powerful catalyst.

Change on the horizon
My thesis is that as the collective pressure from Indians seeking foreign capital and international recognition mounts and trickles its way onto the streets and into the offices of bureaucrats, we're likely to see giant swaths of public, urban India moving toward a more global standard of cleanliness.

Thinking broadly, the more India wishes to challenge various attractive alternatives in South America and Southeast Asia for the sweet lucre of investment capital and global fanfare, the more it will need to actually look the part of a developed nation.

Several well-known companies could succeed based on this larger trend, which should interest Fools everywhere. Two things will need to happen before that, however.

First, India will need to seriously recognize the scope of the issue. Second, it will have to create appropriate incentives to attract the companies that have the expertise needed to fix problems of this magnitude. Fortunately, I think both will happen thanks to the powerful effects of social pressure.

The names to follow
Waste Management
(NYSE: WM  ) is an obvious candidate for large-scale contribution here. The company has a tremendous track record. It currently operates only in North America, but I know of no other market outside of India more ripe for this $18 billion company's strategic entry. Competitor Republic Services (NYSE: RSG  ) is similarly provincial. But both should consider pursuing bigger fish -- immediately.

India is also in desperate need of large-scale wastewater processing and transmission. Veolia Environnement (NYSE: VE  ) is a French firm with global expertise and great experience in the water sanitation business. Plus, it has already done work in India's market directly. Danaher (NYSE: DHR  ) is another name with past work under its belt here in India doing similar things.

As far as the transmission of wastewater to processing facilities goes, one name to follow is Northwest Pipe (Nasdaq: NWPX  ) . This is, once again, a domestic-focused entity, but all of these names are very well-positioned. Keep them in mind.

Finally, let's not forget pest control, an absolute necessity thanks to the lack of serious operators in the aforementioned spheres. Two companies that are pretty much the names to beat in this particular segment are Rollins (NYSE: ROL  ) , which owns the famous Orkin brand across the world, and Ecolab (NYSE: ECL  ) . Both companies have built fortunes on the elimination of the exact same pests that run wild in India's streets and alleys. Why not bring their services here?

The Foolish bottom line
The transition of a nation from "developing market" to "global player" is categorized by many smaller transitions. For sure, one of the most important ones includes looking the part. India's cities need to evolve from filthy to gleaming if the larger nation wants to be considered among the global elite. In time, I expect India to make that leap and I trust that several companies will take advantage.

What say you? Comment below on this page with your own thoughts on the matter or click here to follow along with my Twitter feed to hear more about India's explosive markets.

Fool Nick Kapur rarely ventures out in sandals anymore. He has no position in any of the stocks mentioned above. Republic Services and Waste Management are Motley Fool Income Investor selections. The Fool owns shares of Waste Management, which is also a Motley Fool Inside Value recommendation. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (14) | Recommend This Article (35)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 22, 2011, at 12:58 PM, mkriegel wrote:

    Kapurji,

    I hesitate to accuse you of a decidedly western perspective given your name, but I must say, you've reflected it well. Are you an NRI?

    Respectfully,

    m

  • Report this Comment On February 22, 2011, at 8:30 PM, richdaughter wrote:

    I think India is the reverse of the US - people in the US are far more careful with public places than their own private spaces - I have been in several homes that are disgustingly filthy. On the other hand, Indians seem to care very much how they behave indoors - out of the house, not so much - in fact, not at all. In both cases, offenders are not just poor or uneducated - it is across the spectrum.

  • Report this Comment On February 22, 2011, at 8:33 PM, ET69 wrote:

    Embarrassment...that is the key. Having lived in Japan for many years it never ceased to amaze me how strongly the Japanese can be motivated by the thought of public embarrassment.. Whether something was right or wrong was not nearly as important as saving public face. It seems to be an oriental obsession. So if that is the case use it!

  • Report this Comment On February 22, 2011, at 9:25 PM, aanilkapur wrote:

    Hi Nick: Once again a thoughtful piece on the conflicting and contradictory state of Indian affairs. I view there are tremendous opportunities in the Indian trash business just because of the abundance of its natural availability. If the Middle East has oil and gas, India has the counter-balancing trash. These large quantities can be harnessed into energy and many recycling activities. Municipal corporations, the trash collectors and the society-at-large needs to be educated and incentivized to understand how to harness this valuable resource. This is not a cultural issue but rather one of economics and energy security.

  • Report this Comment On February 22, 2011, at 10:22 PM, 19Patrick58 wrote:

    Excellent article. Thank you. I have been thinking of taking a long position in WM, as I really like the company's philosophy and its green efforts.

  • Report this Comment On February 22, 2011, at 10:39 PM, Anishinabe wrote:

    What I saw was small children in filthy rags with plastic bags searching the street trash for something of value, women carrying bricks on their heads to construction sites, water wheels powered by oxen, women fashioning cow manure into pies to be thrown on the roofs of their huts to be dried into fuel.

    The hotels have to be some of the best in the world.

    From the vantage point of the hotels, it was like standing at the top of Grand Canyon and looking a mile down to the rest of the population on the bottom. Trash removal and waste water disposal is not going to eliminate this intolerable contrast.

  • Report this Comment On February 23, 2011, at 1:37 AM, snafflekid wrote:

    Proper trash disposal is quite low on Maslow's hierarchy of needs, in relation to ekeing out a daily existence.

  • Report this Comment On February 23, 2011, at 9:43 AM, mkriegel wrote:

    Dear Nick,

    That's an interesting contrast, i.e. China. I guess I should say that 1) I'm not Indian 2) India is my adopted home 3) I had just woken up when I read your article 4) I'm particularly sensitive to criticisms of India's filth! I'll comment on one thing in your article and a comment or two that followed. Anyone that spends any time in India will notice that yes, a lot of trash is thrown directly on the ground. Yet, hardly anybody notices how clean it is in that same spot the very next morning. I mean, considering the amount of people and the amount of trash thrown on the ground, it must be going somewhere right? If one looks a little closer they will discover that many, many people are sustained by this garbage. People come through and collect different types of waste which is then recycled or reused. And some people just sweep and remove to a different place where other people sort it out. In this way they're all getting paid and eating, somehow. Not only would copying the west (or far east I assume) generate more pollution (these garbage collectors roll on bicycles...and the trash isn't first collected in a large plastic bag....) it would cost a relative fortune, and quite likely, lives. Not trying to be melodramatic here either. There's actually a lot more tied up in this, I just don't think this is the format for (anymore of) my ranting.

    I think the error lies in the mistaken notion that somehow the west knows best, or at least better. Check out some of the history of the British Raj. Perhaps their response to indigenous smallpox vaccinations, for just one example. India has so much to teach the world and I hope that it gets the chance to do so.

    I hope that I didn't offend anyone.

    m

    PS I love India, but I wouldn't put my money on anything that relied upon improvements in infrastructure...just my two cents.

  • Report this Comment On February 23, 2011, at 11:18 AM, 123attorneync wrote:

    Nick,

    Well written and informative article.

    Along with the garbage and renewable energy industries as investment opportunities in India, may I suggest industries related to the health and wellness. There must be an incredible amount of disease and a high rate of infant mortality that flows from such filth. Illness and infant death surely impacts the productivity of the slum work force, not to mention the pure disgrace of the living conditions depicted in your photos. C.

  • Report this Comment On February 23, 2011, at 12:49 PM, Brent2223 wrote:

    Interesting article and comments. This highlights the risk of international investing, where culture can play a bigger role than underlying economical data (at least when that data is viewed with a Western slant). The solution here is probably much more complicated than simply bringing in an international waste management company. I'd actually be very bearish on any company trying jump in with a 'cookie cutter' solution to this issue (general comment, not directed at any specific companies mentioned).

  • Report this Comment On February 23, 2011, at 12:54 PM, TMFHousel wrote:

    Great stuff Nick.

  • Report this Comment On February 23, 2011, at 3:17 PM, SussexFIA wrote:

    I amde small fortune in investing in the Chinese clean up. Good to see India up to the challenge.

    But WM? What does it has to do with India cleaning up? Something more local for sure.

  • Report this Comment On February 23, 2011, at 3:25 PM, SussexFIA wrote:

    Is it possible for foreigners (US citizens for example) to go to India and open an account and invest in Indian equities?

    Then introduce some Indian companies and we want to follow you.

    I observed India market for a while, very volatile, so potentially profitable.

    Please write an article about these.

  • Report this Comment On February 26, 2011, at 1:41 AM, srmorb wrote:

    With the constant increase of public waste

    need for means of waste disposal and

    new source of energy various waste disposal

    industries have a future in store for them.

    The aspect of trash collecting is still so

    disrespectful that the thought of investing

    in these industries are overlooked except

    by the really broadminded investing.

    Nations like India China and even

    The United States has a source of energy to

    harness that's in an abundance that isn;t

    truly realized. That makes this the best

    time to buy in to companies such as

    Waste Management and keeping an eye

    of splinter garbage recycling companies

    such as Envion

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