We recently compiled a list of the 10 Best Recycling Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Clean Harbors, Inc. (NYSE:CLH) stands against the other recycling stocks.
Imagine living in a society where all kinds of waste are converted into useful resources that power sectors like construction, energy packaging, and automotive while reducing landfill clutter. That’s the reality as calls for sustainability fuel recycling in the race to protect the environment and resources.
Consequently, the waste recycling services market is experiencing robust growth amid increased awareness of environmental sustainability, stringent waste disposal regulations and increased focus on resource conservation. With the recycling services market projected to be worth $78.43 billion by 2028 (as per The Business Research Company), there are tremendous opportunities to unlock by focusing on companies that are involved in the space.
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One of the key areas with tremendous potential in the recycling business involves plastic purification so that it can go back into the circular economy. Katherine Ogundiya, an analyst at Barclays, believes the crop of companies working on plastic recycling has been overlooked, yet they possess tremendous upside potential. “Advanced recycling has immense potential to transform the plastic waste crisis,” she said in a research note to investors.
The metal recycling market is growing significantly, primarily driven by the increasing demand for consumer electronics. Electronic waste is produced in tandem with the growth in the production and use of gadgets like smartphones, laptops, tablets, and home appliances. Essential metals that can be recovered and recycled, such as copper, aluminum, gold, and silver, are present in these devices. To preserve natural resources and lessen the environmental impact of mining and processing new metals, it is essential to recycle metals from e-waste.
The Environmental Protection Agency announced $2.6 billion in newly available funding for drinking water infrastructure through the Bipartisan Infrastructure Law to accompany that rule.
Based on data gathered in 2021, the Environmental Protection Agency projected in a report to Congress last year that the United States will require $625 billion in investments over two decades in drinking water infrastructure. The investment should also benefit companies engaged in the water recycling business by 2030.
The recycling sector is a prime example of how profit and the environment can coexist at a time when sustainability is a major topic of discussion worldwide. In addition to promoting a greener future as we move toward a more circular economy recycling companies offer access to a thriving market with substantial growth potential.
We’ll introduce you to some of the most notable waste management and recycling companies in this article. These businesses spearhead change and present astute investors with exciting prospects of long-term shareholder value.
Our Methodology
To compile the list of the best recycling stocks to buy according to hedge funds, we used a stock screener to find waste management and recycling companies. We then selected the stocks that were the most popular among elite hedge funds, as of Q2 2024. Finally, we ranked the stocks in ascending order based on the number of hedge funds that held stakes in them.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A truck filled with hazardous waste being safely unloaded at a recycling facility.
Clean Harbors, Inc. (NYSE:CLH)
Market cap as of November 7: $14 Billion
Number of Hedge Fund Holders: 37
Clean Harbors, Inc. (NYSE:CLH) is a waste management company that provides environmental and industrial services. Its operations include collecting, transporting, and treating hazardous and nonhazardous waste. It is turning out to be one of the best recycling stocks to buy, going by the 36% year-to-date gain. Record-breaking earnings and revenue growth have been the catalysts for strengthening the company’s sentiments in the market.
Clean Harbors, Inc. (NYSE:CLH) has benefited from high demand for its environmental services because of an aggressive acquisition strategy that has strengthened its long-term prospects. In the third quarter, the company delivered profitable growth in all its operating segments. Consequently, revenue increased 12% year over year to $1.53 billion as net income increased 26% to $115.2 million as reported on October 30, 2024.
Additionally, the third quarter marked the tenth consecutive quarter of margin improvement, affirming why Clean Harbors, Inc. (NYSE:CLH) is one of the best recycling stocks to buy. With the overall demand for its waste management services remaining strong in North America, Clean Harbors should continue to enjoy robust growth and deliver more shareholder value.
Merion Road Capital stated the following regarding Clean Harbors, Inc. (NYSE:CLH) in its first quarter 2024 investor letter:
“During the quarter, I uncharacteristically built a position from nothing into our top holding. Clean Harbors, Inc. (NYSE:CLH) is the largest US hazardous waste management company. Before digging into CLH, I would like to diverge with a bit of personal history. In my early 20’s, I worked at Macquarie Bank, where our team was responsible for acquiring investments on behalf of our managed infrastructure funds and the bank’s balance sheets. One of my first assignments was the acquisition of a publicly traded municipal solid waste (MSW) management company (Waste Industries). While not technically infrastructure per-se, MSW has similar characteristics like being an essential service, operating regional monopolies, and controlling scarce assets. In any case, we paid something like 8-9x EBITDA, which was a premium to the then trading multiple. Waste Industries is now a small part of GFL Environmental, which trades at 12x EBITDA. And GFL is actually at a notable discount to its peers of Waste Management, Republic Services, and Waste Connections, which are at 15x. While hindsight is 20/20, buying into this asset class 15 years ago would have been a home run given their strong cash flow and multiple expansions.
While hazardous waste is not entirely comparable to their MSW brethren, CLH has many attractive attributes. They own and operate scarce assets, including nine incinerators and eight landfills, where new supply is limited by a complex permitting process and significant construction costs. They maintain vertically integrated operations that allow it to control waste from collection through transportation and disposal; this activity similarly requires specialized permits for which the company holds over 500. As the largest player in the space, CLH has a proven history of managing waste properly – a key consideration amongst customers given environmental ramifications. They also have scale benefits that include route-based efficiencies, capacity utilization, and the deepest breadth of service offering…” (Click here to read the full text)
Overall CLH ranks 5th on our list of the best recycling stocks to buy according to hedge funds. While we acknowledge the potential of CLH as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CLH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.