Metalico Inc. (MEA): Tap into the recycling trend

As with all of the tips in my book, you needn't be an analyst with sophisticated chart and graph reading skills to use statistics to make you money -- you just need to use a bit of common sense. One of the most obvious trends today is the rising demand for recycling, not just in this country but also abroad -- as the scarcity of metal resources grows alongside the need to find eco-friendly alternatives to mining new minerals.

In a recent article on the U.S. Department of State website, the president of the Institute for Local Self-Reliance (ILSR) in Washington, Neil Seldman, was quoted about the significant statistical growth of the recycling movement in the U.S., particularly in the construction sector.

He said, "I would say that right now almost 80% of construction and demolition waste is being reused. That is
up about 25% from five to six years ago."

This is good news for those companies that pick up the construction waste. I have long said that I love Metalico,
Inc. (AMEX: MEA), a company that converts scrap metals into usable forms and is the lead fabrication industry-leader in the U.S. Statistics also show what a huge market there is abroad for recycled metal resources. Metalico is pushing into emerging territories hungry for its product.

This past week brought more good news for Metalico, in the form of a competitor, Metal Management Inc. (NYSE: MM) merging with the Australian company, Sims. Goldman Sachs is bullish on the scrap market, and as it reported on the MM/ Sims deal: "We view this merger as positive for the scrap industry, given its fragmented nature. It also should ease buying competition among scrap processors, particularly in the Northeastern U.S."

This means Metalico, which operates out of New York, New Jersey, Pennsylvania and Ohio.

Type of Stock: In the cyclical metal products sector, Metalico converts scrap into useable forms, and leads in the U.S. lead fabrication industry, is growing fast, and is pushing into new territories and commodities. It stands to capitalize on the statistical growth of recycling and the need for scrap metal in the U.S. and abroad

Price Target: The stats all point in favor of Metalico's success. Already up above $10, from the $7.95 share price when I last blogged about it a few weeks back, I still remain bullish for the long-term prospects for this stock. The run-up has been more rapid than even I expected so the stock may take a breather after such a fast gap upwards. However, within 18 months, I do expect Metalico to hit $20. Metal recycling is a hot sector.

Hilary Kramer,author of the newly released Ahead of the Curve, is a financial editor and money coach for AOL and an authority on investing. Visit her at HilaryKramer.com