Environmental Services Sector

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>>> 10 Best Recycling Stocks to Invest In


Insider Monkey

Fatima Farooq

July 7, 2021


https://finance.yahoo.com/news/10-best-recycling-stocks-invest-154348544.html


From investors to governments and companies, everyone today is worried about the planet's ever-growing waste management problem, and rightly so. One major source of this harmful pollution is single-use plastic, which can be dubbed the culprit for quite a lot of our pollution problems whether that be on land or in the sea. The UNEP has estimated that globally, about a million plastic bottles are bought every minute and about 5 trillion disposable plastic bags are used every year. All this plastic is also only used once and then discarded, with most people not considering the option to recycle. As such, humanity is finding itself on the verge of not only horrendous environmental pollution but borderline climate disaster.

With a growing focus on waste reduction and adequate waste management, everyone, including investors and financial advisors, is beginning to consider the waste reduction industry as a viable and important investment option. "The Future of Waste," a paper published by UBS in three parts, has tackled this topic with a focus on where waste comes from, how to reduce it, and how do companies and investors stand to benefit from this reduction. According to UBS, the waste sector is growing rapidly with municipal solid waste being one part of the market that was estimated to be worth $1.7 trillion in 2018.

Higher value-added treatment alongside an improvement in the collection of waste is also due to further increase the size of the industry in the near future. UBS also categorized about three sectors that investors should focus on in the waste management industry, made up of companies managing waste proactively, companies whose sole focus is on waste management, and engagement opportunities through equities and bonds in major companies with the potential to involve themselves in the industry.

The second sector, in particular, can be of interest to investors looking to invest in more environmentally-friendly stocks. UBS has estimated that the growing focus on the reduction of solid and energy waste is due to lead to an increase in the revenues of companies falling under the second category, with estimated market size of $2 trillion. As such, major waste managing companies such as Waste Management, Inc. (NYSE: WM), Clean Harbors, Inc. (NYSE: CLH), Republic Services, Inc. (NYSE: RSG), and Covanta Holding Corporation (NYSE: CVA) are set to become more lucrative investment opportunities in the coming years. Hence, we have compiled a list of the best recycling stocks to invest in.

Investing is becoming difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Without further ado, let's look at the 10 best recycling stocks to invest in. The stocks added to our list were selected on the basis of hedge fund popularity, analysts' ratings, fundamentals, and growth potential based on core business strengths.

10 Best Recycling Stocks to Invest In


10. US Ecology, Inc. (NASDAQ: ECOL)

Number of Hedge Fund Holders: 6

US Ecology, Inc. (NASDAQ: ECOL) is a provider of environmental services to commercial and governmental entities in the US, Canada, Europe, the Middle East, Africa, Mexico, and internationally. The company has three segments: Waste Solutions, Field Services, and Energy Waste. It ranks 10th on our list of the best recycling stocks to invest in.

On June 30th, US Ecology, Inc. (NASDAQ: ECOL) announced an amendment to its previous credit agreement, extending the maturity date on the $500 million revolving facility for more financial flexibility. The new maturity date is now set for June 29th, 2026. In the first quarter of 2021, US Ecology, Inc. (NASDAQ: ECOL) had an EPS of -$0.07, beating estimates by $0.03. The company's revenue was $228.62 million, beating estimates by $3.73 million, and it has a gross profit margin of 25.55%. The stock has gained 0.83% in the past 6 months and 6.88% year to date.

As of the end of the first quarter of 2021, 6 hedge fund holders out of the 866 tracked by Insider Monkey held stakes in US Ecology, Inc. (NASDAQ: ECOL) worth roughly $17.5 million. This is compared to 8 hedge funds in the previous quarter, with a total stake value of $11.9 million.

Like Waste Management, Inc. (NYSE: WM), Clean Harbors, Inc. (NYSE: CLH), Republic Services, Inc. (NYSE: RSG), and Covanta Holding Corporation (NYSE: CVA), US Ecology, Inc. (NASDAQ: ECOL) is a good recycling stock to invest in.


9. Quest Resource Holding Corporation (NASDAQ: QRHC)

Number of Hedge Fund Holders: 8

Quest Resource Holding Corporation (NASDAQ: QRHC) provides solutions for the reuse, recycling, and disposal of waste streams and recyclables in the US. The company offers disposal and recycling services for motor oil, oil filters, scrap tires, and other waste products. It ranks 9th on our list of the best recycling stocks to invest in.

On June 15th, Quest Resource Holding Corporation (NASDAQ: QRHC) confirmed its acquisition of $2.5 million's worth of assets belonging to an Atlanta-based environmental services provider. In the first quarter of 2021, Quest Resource Holding Corporation (NASDAQ: QRHC) had an EPS of $0.06, beating estimates by $0.06. The company's revenue was $35.10 million, up 38.57% year over year and beating estimates by $7.03 million, and it has a gross profit margin of 19.32%. The stock has gained 23.74% in the past 6 months and 187.87% year to date.

As of the end of the first quarter of 2021, 8 hedge fund holders out of the 866 tracked by Insider Monkey held stakes in Quest Resource Holding Corporation (NASDAQ: QRHC) worth roughly $12.19 million. This is compared to 7 hedge funds in the previous quarter, with a total stake value of $7.76 million. Like Waste Management, Inc. (NYSE: WM), Clean Harbors, Inc. (NYSE: CLH), Republic Services, Inc. (NYSE: RSG), and Covanta Holding Corporation (NYSE: CVA), Quest Resource Holding Corporation (NASDAQ: QRHC) is a good recycling stock to invest in.


8. Casella Waste Systems, Inc. (NASDAQ: CWST)

Number of Hedge Fund Holders: 20

Casella Waste Systems, Inc. (NASDAQ: CWST) is a vertically integrated solid waste services company in the US. The company offers resource management services in solid waste collection, disposal, transfer, recycling, and other services. It ranks 8th on our list of the best recycling stocks to invest in.

In September, Casella Waste Systems, Inc. (NASDAQ: CWST) was upgraded to Buy by Stifel Nicolaus with a $60 price target with analyst Michael Hoffman seeming optimistic about the stock's market position in the Northeast where it offers a disposal capacity much needed in the region. In the first quarter of 2021, Casella Waste Systems, Inc. (NASDAQ: CWST) had an EPS of $0.09, beating estimates by $0.05. The company's revenue was $189.53 million, up 3.62% year over year and beating estimates by $0.66 million, and it has a gross profit margin of 34.17%. The stock has gained 5.59% in the past 6 months and 6.81% year to date.

As of the end of the first quarter of 2021, 20 hedge fund holders out of the 866 tracked by Insider Monkey held stakes in Casella Waste Systems, Inc. (NASDAQ: CWST) worth roughly $107 million. This is compared to 19 hedge funds in the previous quarter, with a total stake value of $118 million. Like Waste Management, Inc. (NYSE: WM), Clean Harbors, Inc. (NYSE: CLH), Republic Services, Inc. (NYSE: RSG), and Covanta Holding Corporation (NYSE: CVA), Casella Waste Systems, Inc. (NASDAQ: CWST) is a good recycling stock to invest in.


7. Covanta Holding Corporation (NYSE: CVA)

Number of Hedge Fund Holders: 21

Covanta Holding Corporation (NYSE: CVA) is a provider of waste and energy services to municipal entities in the US and internationally. The company owns infrastructure for the conversion of waste to energy and also operates in waste transport and disposal. It ranks 7th on our list of the best recycling stocks to invest in.

On June 9th, Covanta Holding Corporation (NYSE: CVA) gained in light of news that the company is considering the sale of its Environmental Solutions unit, after which Stifel retained its Buy rating on the stock with a $17 price target. Bank of America is also advising the company on the sale, which was in its second phase this June. In the first quarter of 2021, Covanta Holding Corporation (NYSE: CVA) had an EPS of $0.04, beating estimates by $0.23. The company's revenue was $498 million, up 6.41% year over year and beating estimates by $20.33 million, and it has a gross profit margin of 25.18%. The stock has gained 27.95% in the past 6 months and 35.16% year to date.

As of the end of the first quarter of 2021, 21 hedge fund holders out of the 866 tracked by Insider Monkey held stakes in Covanta Holding Corporation (NYSE: CVA) worth roughly $180 million. This is compared to 21 hedge funds in the previous quarter, with a total stake value of $148 million.


6. Stericycle, Inc. (NASDAQ: SRCL)

Number of Hedge Fund Holders: 24

Stericycle, Inc. (NASDAQ: SRCL) is a provider of regulated and compliance solutions in the US, Europe, and internationally. The company offers waste disposal and recycling services and ranks 6th on our list of the best recycling stocks to invest in.

This May, Baird mentioned Stericycle, Inc. (NASDAQ: SRCL) as a specialty waste stock that outperformed others in the sector, and showed continuous progress. The firm commented that it expects a $100-plus upside, or a 30% upside for the stock in the coming years and that Stericycle, Inc. (NASDAQ: SRCL) is its "best idea" for this year. In the first quarter of 2021, Stericycle, Inc. (NASDAQ: SRCL) had an EPS of $0.71, beating estimates by $0.11. The company's revenue was $668 million, beating estimates by $19.87 million, and it has a gross profit margin of 40.03%. The stock has gained 29.09% in the past year.

As of the end of the first quarter of 2021, 24 hedge fund holders out of the 866 tracked by Insider Monkey held stakes in Stericycle, Inc. (NASDAQ: SRCL) worth roughly $648 million. This is compared to 25 hedge funds in the previous quarter, with a total stake value of $669 million.

Like Waste Management, Inc. (NYSE: WM), Clean Harbors, Inc. (NYSE: CLH), Republic Services, Inc. (NYSE: RSG), and Covanta Holding Corporation (NYSE: CVA), Stericycle, Inc. (NASDAQ: SRCL) is a good recycling stock to invest in.

Nelson Capital Management, an investment management firm, mentioned Stericycle, Inc. (NASDAQ: SRCL) in its first-quarter 2021 investor letter. Here's what they said:

“Stericycle’s medical waste business was not performing well in the middle of a pandemic, partly because people have put off routine care and elective procedures. Additionally, disruptive new competition emerged with the development of in-office appliances that heat up medical waste using high temperatures that kill pathogens and shred sharps. The remains can be disposed of in regular trash after treatment . Lastly, despite a new management team and the offloading of lagging businesses, Stericycle’s performance still underwhelmed and we decided to seek better opportunities within the industrials sector.”


5. Clean Harbors, Inc. (NYSE: CLH)

Number of Hedge Fund Holders: 27

Clean Harbors, Inc. (NYSE: CLH) is a provider of environmental and industrial services in North America. The company has two segments: Environmental Services and Safety-Kleen. It ranks 5th on our list of the best recycling stocks to invest in.

On June 19th, Clean Harbors, Inc. (NYSE: CLH) acquired about $140 million’s worth of assets from Vertex Energy related to used motor oil collection and re-refinery. This May, Baird also mentioned Clean Harbors, Inc. (NYSE: CLH) among the stocks that outperformed rivals in the waste management sector, and about this stock, in particular, the firm commented that the company is expected to see robust profitability in light of recent base oil pricing. The firm mentioned that the valuation of Clean Harbors, Inc. (NYSE: CLH) was also attractive and had potential beat-and-raises. In the first quarter of 2021, Clean Harbors, Inc. (NYSE: CLH) had an EPS of $0.42, beating estimates by $0.17. The company’s revenue was $808.15 million, beating estimates by $21.64 million, and it has a gross profit margin of 31.31%. The stock has gained 13.2% in the past 6 months and 24.09% year to date.

As of the end of the first quarter of 2021, 27 hedge fund holders out of the 866 tracked by Insider Monkey held stakes in Clean Harbors, Inc. (NYSE: CLH) worth roughly $383 million. This is compared to 22 hedge funds in the previous quarter, with a total stake value of $308 million.


4. Waste Connections, Inc. (NYSE: WCN)

Number of Hedge Fund Holders: 31

Waste Connections, Inc. (NYSE: WCN) is a company providing waste collection, transfer, disposal, and recycling services in the US and Canada. Its segments are Southern, Western, Eastern, Canada, Central, and Corporate. The company ranks 4th on our list of the best recycling stocks to invest in.

This April, Waste Connections, Inc. (NYSE: WCN) was one of the stocks initiated with a Buy rating at Goldman Sachs in light of the firm considering the waste management sector one of the beneficiaries of environmental policy changes. Analyst Jerry Revich commented that Waste Connections, Inc. (NYSE: WCN) had a reasonable valuation. In the first quarter of 2021, Waste Connections, Inc. (NYSE: WCN) had an EPS of $0.70, beating estimates by $0.03. The company’s revenue was $1.4 billion, up 3.22% year over year and beating estimates by $17.20 million, and it has a gross profit margin of 40.12%. The stock has gained 15.61% in the past 6 months and 17.87% year to date.

As of the end of the first quarter of 2021, 31 hedge fund holders out of the 866 tracked by Insider Monkey held stakes in Waste Connections, Inc. (NYSE: WCN) worth roughly $822 million. This is compared to 35 hedge funds in the previous quarter, with a total stake value of $626 million.


3. Waste Management, Inc. (NYSE: WM)

Number of Hedge Fund Holders: 32

Waste Management, Inc. (NYSE: WM) is a provider of waste management environmental services to residential, commercial, industrial, and municipal customers in North America. The company ranks 3rd on our list of the best recycling stocks to invest in.

This May, Waste Management, Inc. (NYSE: WM) was among the waste management stocks noted by Goldman Sachs as being reasonably valued and initiated at a Buy rating in light of the sector’s growth potential. The stock also rallied in light of its positive Q1 results. In the first quarter of 2021, Waste Management, Inc. (NYSE: WM) had an EPS of $1.06, beating estimates by $0.05. The company’s revenue was $4.11 billion, up 10.27% year over year, also beating estimates by $76.54 million, and it has a gross profit margin of 38.94%. The stock has also gained 21.23% in the past 6 months and 24.31% year to date.

As of the end of the first quarter of 2021, 32 hedge fund holders out of the 866 tracked by Insider Monkey held stakes in Waste Management, Inc. (NYSE: WM) worth roughly $3.29 billion. This is compared to 37 hedge funds in the previous quarter, with a total stake value of $2.93 billion.


2. Republic Services, Inc. (NYSE: RSG)

Number of Hedge Fund Holders: 36

Republic Services, Inc. (NYSE: RSG) is a provider of non-hazardous solid waste collection, transfer, disposal, recycling, and environmental services in the US. The company ranks 2nd on our list of the best recycling stocks to invest in.

Baird commented on Republic Services, Inc. (NYSE: RSG), stating that the stock’s volume is expected to improve and the company should be able to bring in higher profitability. Goldman Sachs also initiated coverage of Republic Services, Inc. (NYSE: RSG) with a Buy rating this May. In the first quarter of 2021, Republic Services, Inc. (NYSE: RSG) had an EPS of $0.93, beating estimates by $0.07. The company’s revenue was $2.60 billion, missing estimates by -$20.35 million but greater than the previous quarter’s $2.57 billion revenue and up 1.66% year over year. The company has a gross profit margin of 41.17% and the stock has gained 16.52% in the past 6 months and 19.44% year to date.

As of the end of the first quarter of 2021, 36 hedge fund holders out of the 866 tracked by Insider Monkey held stakes in Republic Services, Inc. (NYSE: RSG) worth roughly $1.07 billion. This is compared to 36 hedge funds in the previous quarter, with a total stake value of $1.09 billion.


1. LKQ Corporation (NASDAQ: LKQ)

Number of Hedge Fund Holders: 36

LKQ Corporation (NASDAQ: LKQ) is a distributor of replacement parts, components, and systems for the repair and maintenance of vehicles. The stock, despite not being a traditional recycling stock, ranks 1st on our list of the best recycling stocks to invest in because LKQ Corporation (NASDAQ: LKQ) recycles used autos to reduce landfill waste and provides cheaper alternatives to new car parts by promoting the reuse and recycling of older car parts.

This May, LKQ Corporation (NASDAQ: LKQ) acquired Green Bean Battery and its assets, aiding the company in its mission to be the leading provider of alternative parts for vehicle repair. In the first quarter of 2021, LKQ Corporation (NASDAQ: LKQ) had an EPS of $0.94, beating estimates by $0.31. The company’s revenue was $3.17 billion, beating estimates by $208.21 million and up 5.66% year over year, and it has a gross profit margin of 39.67%. The stock has gained 32.75% in the past 6 months and 41.85% year to date.

As of the end of the first quarter of 2021, 36 hedge fund holders out of the 866 tracked by Insider Monkey held stakes in LKQ Corporation (NASDAQ: LKQ) worth roughly $1.54 billion. This is compared to 50 hedge funds in the previous quarter, with a total stake value of $1.61 billion.

Bonsai Partners mentioned LKQ Corporation (NASDAQ: LKQ) in its first-quarter 2021 investor letter. Here’s what they said:

“LKQ is the largest provider of alternative collision and mechanical automotive parts in the United States. In Europe, they are the leading distributor of general automotive maintenance parts and supplies. Its shares appreciated 20.1% during the quarter.

During the quarter, LKQ shared its fourth-quarter results: showing a slight revenue decline and a nearly 30% increase in quarterly profit Vs. the same period last year. COVID has proved a surprising catalyst for my investment thesis which revolves around optimizing their recent large acquisitions that were never efficiently integrated.

Admittedly, in addition to LKQ’s quarterly performance, thematically, there has been broad enthusiasm for “re-opening” trades, of which, LKQ has been a beneficiary. Most importantly, the prior overhang related to LKQ’s debt burden is now all but behind us. Their net debt to EBITDA ratio now sits below 2x, a stark change from the near 3x leverage ratio before the pandemic. At that time, LKQ’s leverage had the potential to spiral upward to nearly 4-5x if the business experienced a prolonged shutdown. It’s good to be past this issue.”

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