Water and waste management are fundamental to the smooth functioning of any economy, yet these sectors are often overlooked in investment portfolios. The water value chain includes companies involved in pumps and valves; water filtration and purification; water-related infrastructure and networks; metering and billing; and wastewater treatment.
Waste solution providers include companies involved in waste collection, transporting, sorting, and recycling; hazardous-waste management; pollution prevention and control; environment planning; and related consulting and engineering services.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Recurring revenue raises resilience
Republic Services (NYSE: RSG) is a leading provider of non-hazardous solid-waste management and recycling services in the US. The company’s recurring business model provides stable revenue streams, fostering resilience to economic downturns. RSG offers stable pricing, driving mid-single-digit organic growth along with contributions from acquisitions.
Investments in advanced recycling and landfill gas-to-energy projects reinforce its leadership in sustainability and technology. With strong free cash flow, disciplined capital allocation and a prudent dividend policy, RSG balances shareholders’ returns with reinvestment in innovation and operational efficiency. The stock is enjoying a rerating.
Watts Water Technologies (NYSE: WTS) is a global provider of plumbing, heating, and water-quality products and services, serving a large and diverse market with an estimated value of around $20 billion. The company is well placed to capitalise on secular trends in water conservation, energy efficiency and sustainability – critical issues for residential, commercial, and industrial customers worldwide. The business includes a division dealing with repairs and replacements of parts, and has historically generated stable free cash flows.
Watts is rapidly expanding its portfolio of “smart and connected products”: devices capable of being connected through the Internet of Things. These products now comprise 25% of sales and command premium pricing thanks to their ability to reduce consumption of resources and improve operational efficiency. We also expect the firm to enjoy strong pricing power, mitigating any immediate impact from tariffs.
Going for growth in Japan
A lesser-known waste management company we like is Daiei Kankyo (Tokyo: 9336), a leading Japanese waste management and recycling company. It operates in a highly fragmented Japanese waste-management market, with the top four companies accounting for less than 4% of the market. The company is targeting at least ¥10 billion in acquisitions over three years.
Daiei Kankyo recently released its medium-term strategy, and we are encouraged by its near-term plan of maintaining a 35% Ebitda margin while it continues to invest in growth areas, including public-private partnerships. Shareholders’ returns also remain a priority, with a consolidated dividend payout ratio above 33%.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
Can Nvidia’s results defy the doubters?Nvidia stock wobbled last week ahead of an earnings release that carries the weight of expectation of the entire AI industry. Will Nvidia’s results see the stock gain further?
-
UK regions where property tax proposal could hit homeowners hardestChancellor Rachel Reeves is rumoured to be considering stamp duty reform and a mansion tax on high-end homes but homeowners are being urged not to panic yet
-
What we can learn from Britain’s "Dashing Dozen" stocksStocks that consistently outperform the market are clearly doing something right. What can we learn from the UK's top performers and which ones are still buys?
-
Europe’s forgotten equities offer value, growth and strong cash flowsOpinion Jonathon Regis, co-portfolio manager, Developed Markets UCITS Strategy, Lansdowne Partners, highlights forgotten equities he'd put his money in
-
How retail investors can gain exposure to Lloyd’s of LondonIt’s hard for retail investors to get in on the action at Lloyd’s of London. Here are some of the ways to gain exposure
-
Picton Property: a deep-value property playPicton Property has all the qualities of a future takeover target
-
How to invest in the travel industry's boom as tourists get back on the roadThe travel industry is in rude health despite uncertainty about the global economy, Trump’s policies and geopolitical concerns. Investors should buy in now
-
First Solar is set to shine – should you invest?Solar-power specialist First Solar will benefit from Donald Trump’s policies, says Matthew Partridge
-
Profit from the potential in funds focusing on private assetsOpinion Charlotte Cuthbertson and Tom Treanor of the Migo Opportunities Trust highlight three funds where they'd put their money
-
Camellia: an unusual tea producer that rewards patient investorsCamellia is shedding its eclectically diverse portfolio of assets to concentrate on its strengths. For investors, it's a rare opportunity
