Industry independent of the economy: why the waste business is a profit boost for investors

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    There is no genetic engineering in the plant.

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Talking about “garbage stocks” sounds disrespectful. In fact, companies make a lot of money from waste. Shareholders can take advantage of this, as waste management offers attractive profitability prospects, almost regardless of whether the economy is doing well or weakening.

Every time waste disposal companies leave garbage containers in a city due to a wave of disease or other outside influences, many waves are generated. In Germany there is a lot of commotion when garbage remains in the streets for three days.

In other regions, these phases can sometimes last longer: the garbage problem in Paris, for example, is almost legendary. About a year ago, a whopping 5,600 tons of garbage accumulated in the Seine metropolis. The reason: a strike. These circumstances show that waste disposal companies ultimately have the advantage.

About the expert

Markus Zschaber is the founder of VMZ Vermögensverwaltungsgesellschaft in Cologne

Waste Management, for example, is one of the industry giants in waste management., the largest waste disposal company in the US (annual performance through February 29, 2024 plus 37.59 percent). Just a few days ago, the stock hit a new all-time high. The reasons include, among other things, pleasing business figures. Sales rose 5.7 percent to $5.22 billion in the final quarter of 2023, while earnings per share of $1.74 significantly exceeded expectations of $1.53. Over the year, the company grew an impressive 19.7 percent.

Waste Management Inc. (Del.)
Finanz100.de - Current stock market news
  • Waste Management Inc. (Del.) - Finance100

What was especially well received in the market was that Waste Management wants to continue paying satisfactory dividends and buy back its own shares. In 2024, a total of around $2.7 billion will be available for these measures. With these key data, the company is a model for the entire waste disposal sector.

Waste management and technology: something is being created here

With trends such as increasing urbanization and overall population growth, the global amount of waste is also increasing significantly. According to the World Bank, global waste generation will increase to almost 2.6 billion tons by 2030 and up to 3.4 billion tons by 2050. For comparison: in 2016, the amount of waste was “only” about two billion tons.

The industry is also supported by a growing awareness of recycling and sustainability. This last area also gives waste management companies the characteristic of technological values. In order to recycle valuable materials, increasingly complex classification systems are used. The recognition of materials through cameras and algorithms also influences.

More expert knowledge

You will find this and other asset managers with their opinions and investment strategies online at V-Check.de

For years, even for precious metals, it was cheaper to mine them again than to recycle them at great expense. However, with increasingly stricter environmental standards applied in mining and supply chains having to become increasingly “green”, cost pressure is increasing there too. This justifies innovations in waste management: after all, all materials are collected in garbage, especially plastic. If automatic sorting is successful, additional potential could arise, for example in plastic recycling.

Asia has great potential

Household waste can also be used to generate energy: so-called thermal waste recycling produces heat and CO2-neutral electricity. Since district heating networks became interesting again after the energy crisis, new business could emerge for companies in the waste management sector.

However, it is not easy for interested investors to identify promising companies. Waste Management, for example, is certainly a major player in the industry, but with a price-to-earnings ratio of over 30, it is now quite expensive and largely limited to the US market.

Especially in the Asian region there are always interesting candidates with great potential. Waste management is an exciting field for investors who want to focus on ongoing trends.

Please note the disclaimer.

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