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 Republic Services, Inc. (NYSE:RSG) 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 fleet of trucks carrying recyclable materials, highlighting the company’s transfer services.
Republic Services, Inc. (NYSE:RSG)
Market cap as of November 7: $64.84 Billion
Number of Hedge Fund Holders: 48
Republic Services, Inc. (NYSE:RSG) is a leading environmental solutions player specializing in solid waste and recycling services. It is involved in the collection and processing of recyclable, solid waste and industrial waste materials. While the stock is up by about 20% for the year, the outperformance comes from investors reacting to the company’s solid underlying fundamentals characterized by strong customer retention and organic revenue growth.
A noteworthy contributor to Republic Services, Inc. (NYSE:RSG)’s strong performance is the Environmental Solutions (ES) segment. This division’s impressive performance demonstrates Republic Services’ strategic focus on expanding its service offerings beyond traditional waste management. Despite volume drops, the Solid Waste (SW) division was able to sustain strong margin performance. This fortitude in the face of difficult market circumstances demonstrates the business’s capacity for cost control and operational effectiveness.
Consequently, Republic Services, Inc. (NYSE:RSG) delivered solid third-quarter results, on October 30, 2024, with revenues increasing 6.5% year over year to $4.1 billion. It also offered a 17.5% year-over-year increase in earnings per share, totaling $1.8. The better-than-expected results came as Republic Services benefited from innovative recycling and waste collection technology. The development of polymer centers and Blue Polymers and advancements in fleet electrification also continued to boost top-line growth.
Republic Services, Inc. (NYSE:RSG) is one of the best recycling stocks to buy, according to analysts, on planning $200 million worth of acquisitions, which is expected to generate up to $834 million in shareholders’ long-term returns. The development of the Las Vegas Polymer Center and an Indianapolis facility is expected to boost earnings next year. The stock continues to return value with a 1.17% dividend yield.
ClearBridge Investments stated the following regarding Republic Services, Inc. (NYSE:RSG) in its Q2 2024 investor letter:
“We added two new names to the portfolio in the quarter. Republic Services, Inc. (NYSE:RSG) is a waste disposal company in the industrial sector whose services include nonhazardous solid waste collection, waste transfer, waste disposal, recycling and energy services. It is a stable-through-the-cycle compounder in a consolidated industry. The company’s end market is resilient, which gives us some confidence in the stability of its earnings through a recession. In the next few years, cash flow should grow at the high end of the range as Republic Services benefits from high-returning sustainability investments in polymer recycling and renewable natural gas, which also improve the company’s emission and circularity profile.
Republic Services continues to set ambitious goals around sustainability targets, such as increasing its renewable energy generation by 50% through the beneficial reuse of biogas. In addition, its 74 recycling centers process five million tons of materials per year and include a major polymers centre for plastics. Notably, it is the first North American waste and recycling company with an emissions reduction goal approved by the Science-Based Targets initiative (SBTi).”
Overall RSG ranks 3rd on our list of the best recycling stocks to buy according to hedge funds. While we acknowledge the potential of RSG 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 RSG 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.