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It's a cliché, but it's true, and bears repeating during these challenging economic times: It's not a market for faint-of-heart investors, and those with low risk tolerances. Most investors are side-lined, and with good reason. The pronounced U.S. recession continues. Meanwhile, other economic issues await policy resolution in Washington, but the two major political parties are not exactly singing kumbayah.
Well what's an investor to do? Think: Making something out of nearly nothing. Waste Management does.
Waste Management (NYSE: WMI) serves about 21 million residential, industrial, commercial, and municipal customers in the United States and Canada.
Like other recyclers/waste management companies, WMI was hit hard by the downturn in retail sales: People buying fewer televisions, dvd players, and other consumer appliances means fewer boxes and less packaging to throw out in the trash.
Still, while the consumer trash side of WMI's business is likely to continue to face challenging conditions, due to a frugal consumer, the view from here argues the recycling portion of the business represents a revenue stream that's tapped into a long-term bullish trend -- one that will regain traction as the U.S. economy recovers. Solid cash flow, increased productivity, and a reasonable p/e adds to the company's appeal.
Stock Analysis: Waste Management is a moderate-risk stock. Consider buying a 25% position in WMI now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your WMI position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $17.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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