Why Wall Street is salivating over the garbage business

More On:

wall street

Dogecoin slumps after hashtags fuel meme cryptocurrency to record high

GameStop CEO to step down, lifting the retailer’s stock

JPMorgan forced out trader who cooperated with fed probe: lawsuit

Who let the doge out: Dogecoin doubles record rally price

Their business is utter trash — and their stocks could soar as a result.

Garbage truck companies may soon be all the rage — thanks to a new report making the rounds on Wall Street that’s advising investors not to overlook the waste management sector when searching for industries that might benefit from the economic rebound being triggered by coronavirus vaccinations.

“Waste is an underappreciated reopening play,” said the report by Jefferies analyst Hamzah Mazari titled “Q1 Waste Preview: The Best Time to Own Garbage in Recent History.”

The report predicts that trash collection companies like Waste Management, Republic Services and Waste Connections are about to get a big boost as people start spending money on going out and having fun again. It says that personal spending on stuff other than food and energy will rise by a whopping 7.1 percent this year.

And that’s great news for the trash industry, which is “highly correlated” to such spending.

“We remain positive on the waste space … one of the best environments to own coming out of COVID-19,” the report proclaims.  In an interview with The Post, Mazari explained his thesis further by saying that trash from people’s homes shot up last year amid nationwide lockdowns.

But that did nothing to help major trash collection companies because they get paid a flat rate by municipalities to pick up residential garbage and recycling.

These companies, Mazari said, will only bounce back from their COVID-19 doldrums when people start disposing of trash at movie theaters and baseball stadiums because those places pay for garbage pickup based on frequency and container size.

He said he predicts total trash volumes to grow by 4 percent this year — or more than double the average annual growth rate of 2 percent — as people start venturing out again, including for work, entertainment and travel.

Waste Management, for example, will benefit if baseball fans start returning to games again because it services 60 percent of the nation’s baseball stadiums.

Shares of the nation’s three major trash collection companies — Waste Management, Republic Services and Waste Connections — are already up by double digits this year following meager single digit gains last year.

And Mazari sees “more room to grow.” 

“Consumption in 2021 will be up double digits compared to 2020,” Mazari said, noting that consumers who had money to spend last year — thanks in part to government stimulus checks — were using it to pay down debt.

“Now they will go out and spend on entertainment, restaurants, travel and leisure.” 

Share this article:

Source: Read Full Article