Please ensure Javascript is enabled for purposes of website accessibility

Why Waste Management Stock Surged 16.3% in March

By Lee Samaha - Apr 5, 2021 at 10:03AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Market sentiment shifted over the stock in recent weeks.

What happened

Shares in trash collection landfill owner Waste Management (WM 1.26%) increased a whopping 16.3% in March, according to data provided by S&P Global Market Intelligence.  The move was not accompanied by any significant news and probably comes down to a sentiment shift in the marketplace.

As you might imagine, Waste Management's end markets are about as secure as you can get. After all, trash collection is a basic necessity, and the company's ownership of landfills -- highly regulated assets -- means it has an economic moat. That said, waste disposal volumes did decline as a result of the pandemic, and the company temporarily suspended "price increases and certain fees for customers impacted by the COVID-19 pandemic" in 2020, according to management.

Waste disposal bins.

Image source: Getty Images.

Waste Management is not completely immune from the economy. However, it is much less exposed than most, and many investors buy the stock for its safe and predictable dividend stream. They do not buy it as a cyclical play on growth in the economy.

The following chart helps illustrate what happened in March. Waste Management's stock underperformed the S&P 500 and also the technology-heavy Nasdaq-100 index over the last year. However, the Nasdaq index moderated due to a sell-off in technology stocks. Waste Management started to outperform as investors switched into more defensive stocks.

WM Chart

Data by YCharts

So what

It's very difficult to time the market and predict which sector or style of investment will be in fashion from one period to the next. It's far easier to ascertain the value of a stock, and in particular with a company like Waste Management.

The following chart shows the company's valuation (based across a range of valuation methods) has jumped to multi-year highs.

WM PE Ratio (Forward 1y) Chart

Data by YCharts

Now what

Waste Management is a quality company and a relatively safe way to invest for a secure income stream from dividends. However, it's hard not to think that it's been overbought recently, and now might not be the best time to initiate a position in the stock.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Waste Management, Inc. Stock Quote
Waste Management, Inc.
$154.70 (1.26%) $1.93

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/20/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.