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Strategies & Market Trends : Value Investing

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To: Sergio H who wrote (45556)	11/21/2011 2:08:45 PM
From: E_K_S	Read Replies (2) of 78530

Waste Management, Inc. Common S(NYSE: WM ) Upped my holding in WM by 300%. Didn't realize that their landfill real estate (w/ permits) are their biggest asset. New landfills are costing more to approve. Depending how you value these properties, they are worth between $12.75B $27.00/share (pg 155 2010 annual report) or $5.8B $12.60/share after depreciation (pg 51 2010 annual report). Their landfills allow them to land their municipal multi year contracts but now they are making as much money (more when analyzed on ROI) on their recycling programs. More of the waste stream is recycled and the useful life of their landfills are extended (as is their value). From their recent presentation: Waste Management, Inc. Goldman Sachs Global Industrials Conference (See pg 16 of the presentation) phx.corporate-ir.net New Project Return Criteria • Collection and Landfill 12% • Recycling 15% •Waste-to-Energy 11% •Organic Growth 17% Note: Return requirements are adjusted based on the risk profile of the investment The kicker for me is that 10% of their revenue is coming from their move into China (China Industrial Waste Management, Inc. Completes Acquisition of 65% Equity Stake in Hunan Hanyang - prnewswire.com ) They have implemented several of their integrated waste systems into China and are a 50% owner and operator. This is helping the company maintain good organic growth. Inside Wall Street: Waste Management Could Strike It Rich in Chinese Trash dailyfinance.com I am a buyer below $30/share and will load up if the 52wk low is breached at $27. Forward PE is around 12.5 All of their divisions exceed 11% ROI on new projects so as long as their cost of capital remains around 4% (could move higher if interest rates increase), the company should be able to maintain earnings growth. EKS

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