Waste Management Knows Something Can Be Made out of Almost Anything

Posted Feb 1st 2010 9:50AM by Joseph Lazzaro
Filed under: Stocks to Buy, Waste Management Inc. (WMI)

Waste Management (WM) remains well-positioned to profit from the long-term, secular recycling and no-waste trends, and that's the main reason I'm reiterating my buy rating for the company's shares, first recommended on March 25, 2009, at a price of $25.74.

The recession hurt WM's results in 2009, as the commercial impact of reduced industrial output rippled throughout the U.S. economy. But that's just a temporary, cycling downturn. The long-term trend looks very good for WM, and here's why: 20 million customers, 267 owned/operated landfills, 16 waste-to-energy plants, 105 recycling plants, and more than 100 beneficial-use landfill gas projects.

Further, the U.S./global recycling trend has not only continued -- it's intensifying. In fact, communities are starting to shift from a theory of "low waste" to a theory of "no waste" -- recycle or reuse everything -- which bodes well for WM. The First Call FY2009/FY2010 EPS estimates for WM are $1.96 to $2.13.

2010 Outlook: Waste Management is a long-term play, but if you're looking to sell WM within the year, take your profits after it rises to $38 to $39, if it fails to clear $40.

Stock Analysis: Waste Management is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in WM now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your WM position before April 2010. 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.

Tags: industrial output, inthenews, landfill, recycling