Republic Services Inc (RSG-N)

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.