Unlock a World of Investing with a Magnifi Account

START INVESTING TODAY

While investing in trash might not seem appealing, the predictability of the returns the industry generates should be— especially in a post-pandemic market. Consider that the global waste management market size was $2 trillion in 2019. It is expected to grow to $2.3 trillion by 2027, according to Allied Market Research.

Waste isn’t going anywhere. In fact, it’s projected to increase. Worldwide, municipal solid waste generates approximately 1.3 billion tons per year, which is expected to increase to approximately 2.2 billion tons per year by 2025.

Why So Much Trash?

For one thing, trash is fueled by consumerism. While the US represents just 4 percent of the world’s population, it produces 12 percent of global municipal solid waste (MSW), according to a new report by the research firm Verisk Maplecroft. In fact, the average American is responsible for 1,704 pounds of garbage per year, which is approximately three times the global average. 

This is the case for other high-income countries as well. According to the World Bank, high-income countries generate about 34 percent, or 683 million tons, of waste globally, even though they only account for 16 percent of the world’s population.

The projected waste increase is also linked to the increase in the global population and the growth of urbanized populations.

Waste management is vital for the health and sustainability of cities. But, filling landfills isn’t what it used to be. Waste management innovation can actually play a major role in promoting sustainability and reducing the impact of climate change, which presents major opportunities for the waste management industry. 

What Is Waste Management?

The waste sector consists of MSW landfills, industrial waste landfills, industrial wastewater treatment systems, and facilities that operate combustors or incinerators for the disposal of nonhazardous solid waste, according to the United States Environmental Protection Agency. 

Waste management is “the transportation and disposable garbage, sewage, and other waste products. It involves treating solid waste and disposing unwanted products and substances in a safe and efficient manner,” according to Allied Market Research. The five major categories of MSW— or the waste that gets picked up on the curb— includes paper, food waste, plastic, metal, and glass. 

There is some seasonality related to waste management. In the winter, for example, construction slows, and so does construction related waste. After storms, waste removal needs tend to increase. 

Why Invest in Waste Management?

First, consider that waste management isn’t limited to trash pickup at your home. Commercial and residential entities have much higher waste needs. In fact, residential waste management accounts for under a third of the waste business.

But, residential pickup is steady business. Residential accounts are typically negotiated in 3-10 year contracts with municipal governments or homeowners associations. Sometimes, waste management companies have direct subscription services to individual customers. When contracts are renewed, it’s not typical for customers to switch providers, although it’s not unheard of. 

Interestingly, the pandemic caused industrial waste to decrease because of various lockdown or shutdown measures. But, because everyone was home, residential waste increased exponentially. The pandemic also caused the demand for recyclables to drop, meaning that more trash was sent to landfills. The pandemic also greatly increased the need for the proper disposal of medical waste, including used masks, gloves, suits, syringes and other medical equipment. It is anticipated that as industries resume full-capacity production, so too will industrial waste management needs resume a greater capacity.

Waste management companies typically own the landfill sites, acting as a landlord for other companies that pay for a portion of landfill capacity. 

Take the company Waste Management, for instance, which has 20 million customers in 48 states and Canada as well as a team of 44,900 employees. It may not be the most glamorous company, but its business model is easy to understand. Waste Management owns nearly 400 collection operations, 249 active solid waste landfills, 297 transfer stations, and 104 recycling centers, making it the largest non-hazardous waste operator. 

These factors, and the fact that new landfills are hard to establish, make it hard for smaller competitors to gain market share. For investors, that means that major waste management companies can offer stable and reliable dividend stocks. 

In general, waste management as an industry provides an essential service. More than 80 percent of its revenue is generated by services provided, which means that its revenues tend to remain stable even if the economy dips. In that capacity, the industry is considered recession-proof in some ways. Even if you lose your job, your trash will still need to be picked up. 

While the business of waste management might seem stale, they have the ongoing opportunity for increased margins by increasing efficiency. (Think picking up dumpsters when full instead of half empty.)

In addition to increasing waste, the waste management industry has opportunities for implementing renewable technologies. Waste is linked to greenhouse gas emissions. According to the EPA, landfill gas (LFG) is a natural byproduct of the decomposition of organic material in landfills. It is composed of roughly 50 percent methane, 50 percent carbon dioxide, and a small amount of non-methane organic compounds.  

The good news is that waste management companies can do something about it. Waste Management, for example, captures landfill gas and uses it to power residences, businesses and even trucks. Waste is growing, with it, so too will the need for waste management and innovation. 

Unlock a World of Investing with a Magnifi Investment Account

START INVESTING TODAY

Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.

The information and data are as of the March 8, 2021 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.

This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer or custodial services.