If it’s good enough for Tony Soprano, you might say, maybe it’s good enough to invest in. The fictitious (we think) New Jersey crime boss of the hit TV show, which just finished its illustrious HBO run, maintained his thin veneer of respectability with a number of front businesses, including, as he would casually say, “I’m in waste management.” Barone Brothers Sanitation, to be exact, though Tony had to be introduced to the office procedures by his hand-picked stooge as, surprise, Tony had never shown up to actually run the company.
Anyway, Mob jokes aside (and you have to be careful there, viewers of the show will recall the stock Webistics), we can switch gears to mine the wisdom of legendary—and legitimate– investors. The Babe Ruth of stock-picking, Fidelity’s retired Peter Lynch, used to talk always about earnings and fundamentals, finding overlooked companies which were overlooked not because they were exotic, but because they were so dull that they were therefore virtually invisible or ignored. Dull companies in dull industries, yet well run, with earnings growth prospects. Warren Buffett, the Wizard of Omaha, does more than invest, he actually buys such whole companies. And Jim Rogers, the often doom-and-gloom curmudgeon, reaps fortunes in commonly available, in-plain-sight things by investing in them when nobody would think to do it or in ways that nobody would think of, or perhaps want to. There is a common refrain in some of the greatest investors’ strategies, as they may not use the same words, but they often point to the same thing.
It would be hard to find less a less glamorous industry than waste management, despite trying to dress it up with all the trendy green labels or any other way. It’s still based in picking up and disposing of trash (or storing it), with all its opportunities and problems. Yes, recycling is an increasingly important factor, and the large firms are extensively involved in this as well as attempting to develop new processes to improve this.
Waste Management, Inc. (NYSE: WMI) is the leading name in this group, with its $17B market cap and $13B annual revenue, it earned $1.1B last year. It is involved in waste disposal, landfill operation, and recycling, which covers something like what vertical integration would be to a regular industrial company; call this “comprehensive integration.” The stock has traded in the 25.57-41.19 range in the last twelve months, and has recently flirted with the $32 a share range. It will report earnings on February 8, which are expected to be 51 cents a share for the quarter ending December, 2007, versus 41 cents per share for the same quarter a year ago.
While the full year growth figures for revenue and earnings look modest, in the 10% range, what may be understated is the accelerating long term move toward green, which unlike the auto industry, the waste management industry actually has technologies in place, and the improved operational efficiencies at the curbside level. Didn’t actual humans used to pick up trash? Now you have mechanical pickups by the trucks, although we think somebody is still driving them. Tony Soprano would be proud.
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