Republic Services Inc (RSG-N)

A secure business, garbage collection agencies, but all these garbage sector stocks trade at a high 30x PE. RSG has the best credit rating of the group at BBB. Margins are good, better than peers, at 17 cents on the dollar. Good stock, but the stock price is high now. The 1.3% dividend grows at an average 5-10% range while he prefers more than 10%.

When you have oligopolies and duopolies, you tend to get better pricing, as there's no option for where to go. Second-largest in NA. Bill Gates' holding company, Cascades, owns 35% of this name. Bit expensive, forward PE in low 20s. Degree of resilience built-in. 50% of pricing is linked to inflation, while the remaining 50% open market is where the pickup comes from.

RSG vs. WCN Waste management, one of the largest in the US. Likes the sector. Tailwinds from economic growth, a sticky business, gets pricing power each year. Even though more expensive, he likes WCN the best, as it has a better track record, better margins and growth, and could better drive M&A synergies given their best in class practices and margin profiles. Nothing wrong with RSG, but WCN is the best in class name for the next 5 years.

(A Top Pick March 15/16. Up 32%.) If you think the economy is getting better, then waste is a great business to be in. It is dependent on economic activity. He also likes Waste Connections (WCN-N).

The US economy is slowly improving, and waste is going to grow along with that. The industry has been consolidating and there have been a number of consolidations which keeps the industry profitable. It is completely dependent on economic growth in the US. They’ll grow their earnings at about 10% per year. Have grown dividends 8.5% per year and have hundreds of landfill sites and hundreds of waste collection areas in 41 states.

When you drill into GDP data, private sector GDP was above 3% while public sector DGP was below.