We recently published a list of 10 Best Environmental Stocks to Buy. In this article, we are going to take a look at where Waste Management, Inc. (NYSE:WM) stands against other best environmental stocks to buy.
Environmental stocks have gained attention in recent times with more investors being interested in stock stability and increased regulatory focus for climate change issues and the financial markets. They are often favored for their potential to tap into environmental opportunities, as consumers, regulators, and companies seeking to meet Net-Zero targets increasingly look for new and innovative solutions to combat climate change and overcome environmental challenges.
Fund managers looking to meet their transition strategies are heavily shifting towards low-carbon solutions and projects. Potential growth projects include renewable energy projects, nuclear energy restarts and renewals, solar, battery storage projects, carbon capture and storage, and new natural gas capacity among others. The US SIF Trends Report 2024/2025 identified that 73% of surveyed investors expect the sustainable investment market to be on the rise in the next 2 years, driven by client demand, regulatory requirements, and advances in data analytics. The fund landscape is fast changing with transition investing becoming the major focus for investors, even with the potential uncertainties due to the Trump administration’s proposal to revoke EV tax credits, driven by new technologies in the sector and decreases in costs. The outlook for renewable energy is still positive. A PwC report finds that ESG-focused institutional investment will rise 84% to $33.9 trillion in 2026, comprising over 21.5% of assets under management. Environmental stocks have experienced fluctuating performance, influenced by market dynamics and investor sentiment in recent years. In 2022, U.S. ESG funds net inflows decreased significantly from $69.2 billion in 2021 to $3.1 billion, the lowest level in seven years. 2023 followed a similar trend, with ESG funds in the U.S. experiencing net outflows exceeding $5 billion in the final quarter, the most substantial quarterly withdrawal in over five years. Poor investment performance and increased political scrutiny were driving forces for the slowdown. Even with the market challenges and fluctuations, certain companies within the environmental sector have demonstrated strong resilience. In summary, while investor opinions of stronger environmental stocks performance over traditional stocks remain debatable, select firms continue to stand resilient in the ever-evolving ESG landscape.
What Are Environmental Stocks?
Several funds are focused on industry stocks for companies that provide products and services in climate solutions or green investments that work towards reducing harmful pollutants or sustainable resource use. This can either be in the area of alternative technologies, e.g. solar/wind power, or other areas of environmental solutions such as waste management. As industries that rely heavily on fossil fuels and create pollution are facing higher costs, fines, and regulatory scrutiny, the market opportunity for alternatives is on the rise. Several mutual funds and index funds are looking at these alternative investments that provide a strong potential for future returns.
The Green Economy Index Family tracks the sectors focusing on the enhancement of economic development based on the reduction of carbon usage. These sectors include energy efficiency, bio/clean fuels, and pollution mitigation. Environmental stocks form a key part of sustainable investing, and therefore, by prioritizing environmental concerns, investors can contribute to long-term sustainability and reduce the negative costs of climate change.
However, with growing fund manager attention and the potential of gains through policy benefits, the risk of greenwashing and misleading claims by companies is also becoming a significant challenge. This has led financial watchdogs to increase scrutiny and seller responsibility in several geographies that specify accurate ‘labels’ for levels of environmental and green funds. With the US Securities and Exchange Commission (SEC) ESG Disclosure Rule, stricter and more enforceable ESG regulations and disclosure requirements are on the horizon for the US markets.
Our Methodology
To come up with the best environmental stocks to buy list, we have considered all US environmental stocks that feature on different indexes and have upscale potential. To identify stocks from the environmental sector we have used the FTSE Green Revenues Classification System, to come up with the sectors that are working in the provision of green solutions, these included companies involved in alternative energy generation, water and wastewater treatments, transport solutions, and pollution control. We then used Insider Monkey’s Hedge Fund Q3 2024 database to rank 10 stocks based on the number of hedge fund holders. Our list is sorted in ascending order according to hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Aerial view of a Waste Management Transfer Station, highlighting the scale of its operations.
Waste Management, Inc. (NYSE:WM)
Number of Hedge Fund Holders: 54
Headquartered in Texas, Waste Management, Inc. (NYSE:WM) specializes in waste management and comprehensive waste as an essential environmental service. As an integrated waste company, it is involved in waste collecting, recycling, and managing landfills.
Waste Management, Inc. (NYSE:WM) has a continued interest in continuously investing in recycling and renewable energy growth projects, with the latest one being a newly set up $40 million, 57,860-square-foot material recovery facility (MRF) in Philadelphia that looks to handle the recycling needs of the region and other areas of the suburban counties. The legacy business continues to focus on expansion with its mergers and acquisitions strategy and has recently completed a $7.2 billion acquisition of Stericycle, Inc., a company specializing in collecting and disposing of medical waste. This strategic move strengthens WM’s comprehensive environmental solutions and is a step into the growing healthcare market. The merger will also help advance the company’s sustainability commitments, solidifying its position as an environmental solutions company.
Waste Management, Inc. (NYSE:WM) presented a strong outlook in 2024, ending with a total revenue of $21.39 billion and a $5.89 billion revenue for Q4, reaching a year-on-year Quarterly Revenue Growth of 7.90%. In December 2024, WM announced a raise in its quarterly dividend rate for 2025 from $0.75 to $0.825 per share, registering a 10% increase. This cranked up the annual dividend to $3.30 per share, marking the company’s twenty-second consecutive year of dividend increases. In Q4 of 2024, the company reported business growth in solid waste, enabling a company-best full-year operating EBITDA. The success was driven by the optimization of operational costs and a strong execution of price programs.
Waste Management’s (NYSE:WM) strong legacy and continued investment in sustainability make it a lucrative environmental stock to invest in. The commitment to environmental sustainability is evident through its significant investments in renewable energy. Between 2022 and 2026, the company plans to invest $3 billion, with $1.6 billion directed toward building 20 natural gas plants at its landfills and $1.4 billion to enhance its recycling facilities. The strong focus on renewable energy aligns with the rising energy demand driven by transportation and artificial intelligence data centers.
Overall, through strategic acquisitions, financial growth, and a strong commitment to sustainability, Waste Management (NYSE:WM) continues to position itself as a strong environmental stock candidate.
Overall, WM ranks 8th on our list of best environmental stocks to buy. While we acknowledge the potential for WM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
