Why you need to have This All-Weather Stock in your Portfolio
Waste Management, Inc. provides waste management environmental services to customers in North America. It provides collection services, such as pick-up and transportation of waste and recyclable materials from where it was generated to a transfer station, material recovery facility (MRF), or disposal site. Waste Management owns, develops, and operates landfill gas-to-energy facilities along with transfer stations in the United States.
As of December 31, 2018, the company owned or operated 247 solid waste landfills; 5 secure hazardous waste landfills; 102 MRFs; and 314 transfer stations. The majority of Waste Management’s assets lie in property, plant, and equipment. Net of accumulated depreciation, WM holds approximately $12 million of PP&E. Since 2013, their short-term debt obligations have been nearly halved, down from $726M in 2013, to $432M in FY18. Long term borrowings have remained fairly flat at approximately $9.5 billion.
Since 2015, net income has doubled from $753 million to almost $2 billion in FY18. In FY18 Waste Management boasted a 31% Return on Equity, and over 10% Return on Capital. The company has extremely strong margins, with a gross margin and net income of 38% and 13%, respectively. While net income is up nearly 2.5X, Waste Management’s top line has only grown just 15%- indicating improved operational efficiency and cost management.
In 2019, Waste Management acquired Advanced Disposal Services for approximately $3 billion. Advanced Disposal Services had a strong presence in the southeastern region of the United States, especially in their state of headquarters, Florida. This acquisition paved the way for Waste Management to expand heavier into Florida and the Bahamas. This acquisition provides synergies of over $100 million, at little cost for Waste Management.
Waste Management is a great name to own in times of volatility. With the trade ware waging, record low interest rates, and an election year nearing, predicting exactly where the market will go will be a tough task. Limiting downside risk in your portfolio should be a priority for all investors. Waste Management presents a financially stable company, with strong, consistent margins. In a business driven by acquisition, WM is expanding their global footprint in an effort to grow their top line. If one thing is for certain in good times and bad, people will continue to produce trash, and Waste Management will continue to take care of it.
Disclosure: I am/we are long WM.