A bullish theme we like is “trash,” especially the nascent trash problems in emerging countries. For example, China has a burgeoning garbage problem, for as per capita incomes rise, people consume more “stuff” and consequently generate more garbage. Moreover, China has averred that it wants to generate 30% of its electricity from non-fossil fuels in the not too distant future.
Enter Outperform-rated Covanta (NYSE:CVA). Simply stated, Covanta takes solid waste, burns it, and in the process produces “dirt cheap” electricity. While not a large player in China just yet, China seems like a logical extension for Covanta.