Michele Robitaille Waste Connections WCN-T TOP PICK Jul 15, 2005

Defensive. Their business model works in any business cycle, including a downturn. They have contracts with energy companies, which may suffer a bit, but garbage needs to be collected consistently. They run an efficient business and make accretive buys of companies. Has long owned this.

The really great companies that execute well continue to do this in a bull market. This company continues to execute well and is at an all time high.

It's chugging along. Likes management a lot. This can do well in any economy, strong or weak.

High quality, regional monopolies, pricing power, integration opportunities are plentiful. Valuation is about as high as it goes, which makes him hit pause on buying more. Total return is in the range of high single-digits to low doubles. Easy money's been made. Hold, and don't realize the capital gains on it.

Had a good year and a good 5 years, so there tends to be profit taking. But this is not the time to sell.

The space has been a fantastic investment. There aren't a lot of options for getting rid of garbage. Once you're on their books, they can gradually increase prices. The issue is that valuations are quite high, and always have been. High barriers to entry. When stocks come off, the expensive ones come off the fastest.

Regional monopoly in Canadian markets. Very good position within the market. Able to maintain pricing with margin expansions. Cooling inflation also good for labor costs and bottom line. Not a "roll up" strategy, but might start to look at buying other companies. 

Garbage is boring and a beautiful business. Looks poised to break out to new highs. A boring name with strong technicals (price momentum, RSI, and whether institutions are buying or selling). Price momentum is improving and, especially, trading above 50- and 200-day MAs. RSI is reaccelerating. Strong technical setup, with a good fundamental idea. Yield is 0.6%.

WCN continues to chug along nicely. Valuation is high at 36X earnings now, but investors are willing to pay up for reliability. Growth has been very steady and decent growth is very much expected over the next two years. The balance sheet is somewhat levered but cash flow can support it. The stock has been solid, up 371% in the past decade. The Q1 was good and the company noted business trends were stable. We would be comfortable owning this.
Unlock Premium - Try 5i Free

Switched out and into WM, which is bigger and better. Still, has no quarrel with this name. Owns fewer landfills, but advantaged by operating in lightly contested geographies. High-single or low-double-digit earnings and dividend growth rate. If you own, no reason to sell.

Yesterday, Bloomberg posted an article noting it may ultimately cost more to address a high-temperature event at WCN's Chiquita Canyon Landfill than previously thought. The company has budgeted for $100M to $150M in remediation costs this year but Bloomberg said it may be more. Overall, we likely the company, and such events do come with the industry, and WCN has a solid long term operating record. We would be fine holding, and would be buyers into further weakness. We would consider among the best in the sector. 
Unlock Premium - Try 5i Free