Environmental Services Sector

[gfp927z]

Waste Management - >>> These 3 Stocks Could Finally Become Buys in a Bear Market


Motley Fool

By Matthew DiLallo, Neha Chamaria, and Reuben Gregg Brewer

May 28, 2022


https://www.fool.com/investing/2022/05/28/these-3-stocks-could-finally-become-buys-in-a-bear/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


I'd love to go dumpster diving for this stock

Matt DiLallo (WM): Investors have been bidding up shares of collections and recycling company WM for several years. The company currently sells for nearly 35 times its earnings and about 15 times its cash flow from operations, both historically high multiples. Because of that, its dividend yield has fallen to its lowest level in years at around 1.5%. That's despite 19 consecutive years of increasing the payout, including a 13% boost last year.

While I love the company -- it has delivered steady growth and consistently returns cash to investors -- I haven't added to my position in years because it's too expensive for my liking. However, I have it on my watch list to buy if a bear market takes it lower. When stocks tanked during the pandemic's early days, WM shares briefly traded at a much more attractive valuation of less than 24 times earnings, under 10 times cash flow from operations, and a dividend yield approaching 2.4%. I missed my chance to add at that time, so I wouldn't mind another opportunity.

In addition to the steady cash flow produced by its collections, disposal, and recycling business, another factor I like about WM is its investments in renewable natural gas (RNG). WM plans to spend $825 million through 2025 to expand its RNG output by 600%. These investments will capture methane produced by its landfills to power its entire fleet and provide 1 million homes with renewable energy. That will save it money, generate incremental income, and reduce carbon emissions.

While there's no guarantee that WM's stock will tumble in a bear market -- shares were recently 7% below their peak despite a nearly 20% decline in the S&P 500 -- it's one stock I'd love to buy if a bear market made it a lot cheaper.

<<<



---