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The Recycling Boom
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Business Week recently carried a lengthy feature on recycling, noting:
The calculus is simple: As the prices of oil and other raw materials rise, recycled products become more attractive. Consider that 8% of global oil production is siphoned off to make plastic each year. Recycled plastic, however, requires 80% less energy to produce. Recycled aluminum burns up 95% less energy. Recycled iron and steel use 74% less, while paper requires 64% less.
The money piles up quickly: One ton of recycled aluminum saves an average of $700 in electricity. The Environmental Protection Agency estimates that if the recycling rate were to increase by just five points, to 35%, this would save the equivalent of almost 2 billion gallons of gasoline annually.
The article also discusses investment opportunities:
The great reappraisal of trash has even prompted a Wall Street analyst to cordon off recycling in a separate investment category, like consumer goods or emerging markets. Eric Prouty of Boston-based brokerage Canaccord Adams started following recyclers full-time in 2006; now he covers 11 publicly traded companies.
Since its inception late in 2006, Prouty's six-stock Buy list has returned 180%, trouncing the Standard & Poor's (MHP) 500-stock index's 2% rise. His year-old "Best Ideas" list of eight stocks has shot up 150%, compared with the broad market's 6% gain. "Recycling," says Prouty, "might be the most overlooked beneficiary of the commodities boom."
The report does not reveal Prouty's six-stock Buy list. However, an Analyst Scorecard from Yahoo! Finance says that stocks he covers include Casella Waste Systems, Interface, LKQ Corporation, Schnitzer Steel, Trex, Advanced Environmental Recycling, Apogee Enterprises, Metalico and Orion Energy Systems.
I have already featured two other recyclers, both based in Australia, but with significant businesses overseas, whose prospects appear excellent.
The first is Sims Group, a scrap metals dealer which is now the world's largest electronics recycler. This has become a fast-expanding business, and though it is still just 10 per cent of company revenues it is fully a quarter of profits.
The other company is GRD, which sorts, processes and recycles municipal waste. It owns and operates an urban waste treatment project in Sydney, designed to process 175,000 tonnes of municipal solid waste annually and in 2007 won its first international contract, for the Lancashire Waste Project in the UK.
July 31st, 2008
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