Anne Marie
Key Takeaways
Waste Management (NYSE: WM) leads with a 53% market share.
With 437 subsidiaries, it offers diverse investment opportunities in waste management.
Waste Management champions sustainability through recycling, emissions reduction, and renewable energy.
Strong financials, including high ROE and low volatility, make WM a solid long-term investment.
It has even been said by some of the best investors of our time, like Peter Lynch, that "a company that does boring things is almost as good as a company that has a boring name, and both together is terrific."
One such company's name is Waste Management (NYSE: WM), and the service provided is just that, managing our waste! According to what Peter Lynch said, this is a company that's off to a great start in terms of a boring name and a boring company.
What's more, it carries the majority market share, has the largest network of landfills in the U.S., is leading the market in its growth sentiment towards "going green" and, whether you knew it or not, is actually a holdings company that consists of hundreds of subsidiary waste management services.
Here's more on why it's a great pick for both conservative and long-term investors...
1. 53% Market Share Plus Industry Diversification
Some may wonder if having such a large share of the market carries the risk of being labeled a monopoly, but don't forget that WM is actually a holdings company of hundreds of subsidiary owned companies, 437 subsidiaries to be exact.
In other words, when investing in Waste Management, you're putting your money to bat for over 400 companies and in 53% of the waste management industry. Furthermore, of the 437 companies owned by WM, ownership in 247 solid waste landfills, 5 secure hazardous waste landfills, 102 material recovery facilities, and 314 transfer stations is included.
Among the subsidiary companies include a diverse range of niche companies that provide the following diverse services within the waste management industry:
Waste management services for residential, commercial, industrial and municipal customers
Waste collection services
WM owns, develops and operates multiple landfills, this includes ownership in the real estate, as well as the revenue from operations of the landfills
Materials processing services
Commodities recycling services
Recycling brokerage services for third party companies (this means that, even for the companies within the industry that it doesn't own, it is providing services for and taking a small share of revenues!)
Construction and remediation services
As you can see, it's almost an understatement to say that WM has its hand in nearly every area of the waste management industry, a positive indicator of a potentially great investment.
Why Do Investors Need To Diversify Their Portfolio?
2. WM Is Leading the Way for the Future of Waste Management Services
A common question many might have is "what is the future outlook of the industry?" Some may even take it one further to say, "what happens as the waste management industry moves towards a 'greener' economy?"
Both are great questions and the answers further support my belief in WM as an investment. Remember those 437 subsidiary companies owned by Waste Management? Among them are some of the leading companies that are paving the way for a greener economy. If there are companies promoting the habit of recycling, reducing the pollution of carbon monoxide in our air, and saving and protecting the trees, there is a high chance that the campaign is being led by WM or an owned subsidiary.
In fact, to give you an idea of some of the impact it has had towards a green economy, consider the following:
It repurposed 14.8 million tons of material in 2022
It produced 15.4 million metric tons of MMTCO2e, a carbon dioxide measure equivalent, in 2017. In other words, rather than using 2.4 metric tons of carbon dioxide for energy, it used proper waste disposal and converted it to energy production that is the equivalent of 2.4 metric tons of carbon dioxide.
Reduced its landfill emissions by 10% year-over-year in 2022.
Embraced renewable electricity which now accounts for 42% of its usage, up from a mere 1% in 2020.
Long story short, WM has put the green economy movement at the top of its priority list. This reduces the risk of a potential "dying industry" and further supports the belief that it is the market maker for the future of the waste management industry, both of which are positive indicators of a bright future for the company.
3. Above Average Fundamentals
A quality investment without a proper analysis of the fundamentals of the company is essentially a blind investment decision. Aside from the stark facts discussed above, there are three strong indicators that make WM a great long-term investment.
Return on Equity
The Return on Equity (ROE) measures the ability of a company to generate profits with investors' money. WM's trailing twelve-month ROE is 33.5% in comparison to the industry average of 20.9%. This indicates that when you invest in WM, you can be confident that it is very strategic about how it uses your money to grow the company and ultimately your wealth.Gross Profit Margin
This is the amount of money left over after subtracting costs from revenues. WM has a Gross Profit Margin of 38.2%. This means that, for every $1 in sales made, it keeps roughly $0.39 after subtracting the costs of doing business. Whatever it's doing, and whenever it does it, WM is making money on it!
Some companies and industries don't even break the double digits in percentage of Gross Profit Margin. With these kinds of margins, one fact is for sure: it would be difficult for WM to lose money on sales made. This to me indicates a very strong business model that merits a "checkmark" of approval.Beta
The beta indicates how volatile a stock is in comparison to the market as a whole. WM currently has a 3-year average beta of 0.6. This indicates that WM will likely have less of a negative impact in a bear market and will likely have a lower positive impact during a bull market, and less volatility overall.
What does this mean? In short it indicates lower risk, slightly lower return, and steady long-term growth. A solid investment portfolio has an array of different risks, and those looking for a solid company with less volatility to add to their portfolio would be wise to look at WM.
Here's to Investing in Garbage!
The waste management industry isn't going anywhere soon and the leading company of that industry has even trademarked the industry title and branded it as its own. WM has strategically nudged its way into nearly every corner of the industry and created a goliath of a company that will be hard for any competitor to take down.
With a strong diversification of hundreds of subsidiary companies in all sectors of the industry, while paving the way to a greener economy, and a solid history of growth and company fundamentals, Waste Management is in a prime position to buy and hold for a long time.