We recently compiled a list of the 10 Best Recycling Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Veralto Corp. (NYSE:VLTO) stands against the other recycling stocks.

Imagine living in a society where all kinds of waste are converted into useful resources that power sectors like construction, energy packaging, and automotive while reducing landfill clutter. That’s the reality as calls for sustainability fuel recycling in the race to protect the environment and resources.

Consequently, the waste recycling services market is experiencing robust growth amid increased awareness of environmental sustainability, stringent waste disposal regulations and increased focus on resource conservation. With the recycling services market projected to be worth $78.43 billion by 2028 (as per The Business Research Company), there are tremendous opportunities to unlock by focusing on companies that are involved in the space.

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One of the key areas with tremendous potential in the recycling business involves plastic purification so that it can go back into the circular economy. Katherine Ogundiya, an analyst at Barclays, believes the crop of companies working on plastic recycling has been overlooked, yet they possess tremendous upside potential. “Advanced recycling has immense potential to transform the plastic waste crisis,” she said in a research note to investors.

The metal recycling market is growing significantly, primarily driven by the increasing demand for consumer electronics. Electronic waste is produced in tandem with the growth in the production and use of gadgets like smartphones, laptops, tablets, and home appliances. Essential metals that can be recovered and recycled, such as copper, aluminum, gold, and silver, are present in these devices. To preserve natural resources and lessen the environmental impact of mining and processing new metals, it is essential to recycle metals from e-waste.

The Environmental Protection Agency announced $2.6 billion in newly available funding for drinking water infrastructure through the Bipartisan Infrastructure Law to accompany that rule.

Based on data gathered in 2021, the Environmental Protection Agency projected in a report to Congress last year that the United States will require $625 billion in investments over two decades in drinking water infrastructure. The investment should also benefit companies engaged in the water recycling business by 2030.

The recycling sector is a prime example of how profit and the environment can coexist at a time when sustainability is a major topic of discussion worldwide. In addition to promoting a greener future as we move toward a more circular economy recycling companies offer access to a thriving market with substantial growth potential.

We’ll introduce you to some of the most notable waste management and recycling companies in this article. These businesses spearhead change and present astute investors with exciting prospects of long-term shareholder value.

Our Methodology

To compile the list of the best recycling stocks to buy according to hedge funds, we used a stock screener to find waste management and recycling companies. We then selected the stocks that were the most popular among elite hedge funds, as of Q2 2024. Finally, we ranked the stocks in ascending order based on the number of hedge funds that held stakes in them.

At Insider Monkey, we are obsessed with 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).

Veralto Corp. (NYSE:VLTO)

Market cap as of November 7: $25.47 Billion

Number of Hedge Fund Holders: 42

Veralto Corp. (NYSE:VLTO) is one of the best recycling stocks to buy, as it is well-positioned to benefit from significant water scarcity, demand for quality water, and digitization. The company has carved a niche in providing water analytics, water treatment, packaging and colour services worldwide.

Likewise, it delivered solid third-quarter results on October 25, 2024, as it benefited from strong demand for industrial water treatment and recovery in the consumer packaged goods market. Consequently, sales were up by 4.7% year over year to $1.31 billion, with Veralto Corp. (NYSE:VLTO) achieving an operating profit margin of 23.4% and net earnings of $219 million. Following the better-than-expected results, the company has raised its full-year guidance with diluted earnings per share expected at between $3.44 and $3.48 from the previous guidance of $3.37 to $3.45.

Additionally, Veralto Corp. (NYSE:VLTO) has completed the acquisition of TraceGains, which is expected to bolster its packaging and colour solutions segment. The acquisition is expected to strengthen the company’s ability to provide greater value to consumer brands by helping digitize critical workflows and accelerate time to market.

The stock is fairly valued with a price-to-earnings multiple of 27, in line with the industrial sector average, while offering a 0.36% dividend yield. Recurring revenue growth, robust core sales growth, and gross margins make it one of the best recycling stocks.

Here is what Aristotle Capital Value Equity Strategy said about Veralto Corporation (NYSE:VLTO) in its Q2 2024 investor letter:

“In the fourth quarter of 2023, we received shares of the water and product quality company Veralto Corporation (NYSE:VLTO) when Danaher, a current Value Equity holding, spun off the business. After further assessing the now independently operated Veralto, we decided to exit our position. We believe our other holdings within the water value chain, including Xylem, American Water Works (our most recent purchase) and to some extent Ecolab, are more optimal investments.”

Overall VLTO ranks 4th on our list of the best recycling stocks to buy according to hedge funds. While we acknowledge the potential of VLTO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than VLTO 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.