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 Waste Management, Inc. (NYSE:WM) 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).
Aerial view of a Waste Management Transfer Station, highlighting the scale of its operations.
Waste Management, Inc. (NYSE:WM)
Market cap as of November 7: $87.69 Billion
Number of Hedge Fund Holders: 49
Waste Management, Inc. (NYSE:WM) provides environmental solutions to residential, commercial, industrial, and municipal customers. It offers collection services, including picking up and transporting waste and recyclable materials from where they were generated to a transfer station material recovery facility (MRF).
Waste Management, Inc. (NYSE:WM)’s investment in sustainability initiatives in recycling automation and renewable natural gas makes it one of the best recycling stocks to buy. While the stock is trading near its all-time highs after gaining about 19% year to date, it has produced a total return of 57.3% over the past three years on generating impressive returns from the collection, transporting and processing of commercial, industrial, and residential waste.
While its sales growth stalled at the height of the pandemic in 2020 and 2021, they have seen a significant rebound over the past two years, leading to substantial margin improvement. Waste Management, Inc. (NYSE:WM) delivered solid third-quarter results on October 29, 2024, with earnings per share of $1.96, above consensus estimates of $1.88. Revenue in the quarter was up 7.9% year over year to $5.61 billion.
Waste Management, Inc. (NYSE:WM) benefits from steady cash flow from a dependable clientele because waste is essential to life. It gains over time from both an expanding economy and a growing population. Waste, consumption, and production all rise with population and economic output. Consequently, the company expects its full-year revenue to grow by 6% from a previous guidance of 5.75%.
It has also hiked its free cash flow to between $2.1 billion and $2.2 billion from a previous guidance of $2 billion to $2.15 billion. The expected FCF growth should allow the company to continue rewarding investors with dividends that currently yield 1.40%.
Overall WM ranks 2nd on our list of the best recycling stocks to buy according to hedge funds. While we acknowledge the potential of WM 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 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.
