Should Environmental Professionals invest in Waste Companies?

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Should Environmental professionals invest in waste management companies?  If you take your advice from the Motley Fool (Fool.ca), then the answer is a qualified “yes”.  In a recent article by Andrew Walker of the Motley Fool, he recommends investing in Waste Connections (TSX:WCN)(NYSE:WCN), a provider of solid waste collection, transfer, recycling and disposal services in mostly exclusive and secondary markets across the US and Canada.

In Mr. Walker’s view, Waste Connections is a good long term investment.  He states that the company continues to grow through acquisitions, and investors should see more deals in the coming years as the industry consolidates. At present, the business serves six million customers in 40 states and six Canadian provinces.

Mr. Walker provides information on Waste Connections latest financial statement to justify his optimism on the compnay.  The 2018 Q2 financial statement reported adjusted net income of $0.65 per share, representing an increase of 18.2% over the same period last year. Management just upgraded the revenue, earnings, and free cash flow outlook for 2018, given the strong start to the year and positive pricing trends in the solid waste segment.

Mr. Walker is of the view  that the garbage business is relatively recession resistant, so Waste Connections should be a good contender for a buy-and-forget spot in your portfolio.  Investors who’d bought the stock just five years ago paid about $35 per share. Today, it trades for about $103.  He sees it moving pretty much been a steady upward trend.

There is some dispute within the waste management industry if it is recession proof.  The solid waste industry is generally considered to be recession resistant, because waste collection and disposal services are needed in both good and bad times. But the recession that began in 2008 hurt both the private and public sectors of the industry.  In 2009, American Recycler ran an article on the impacts on the recession on the waste industry.  In the article, Bruce Parker, president and chief executive officer of the Washington D.C.–based National Solid Waste Management Association stated unlike some of the less severe recessions during the last half of the 20th century, declines in volumes this time are impacting the entire solid waste industry, said . He added that the current recession is the “most steep and complex recession” since the Great Depression, which started in 1929.

 

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