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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Sergio H who wrote (45556)	11/18/2011 12:39:49 AM
From: E_K_S	1 Recommendation Read Replies (2) \| Respond to of 78530

Hi Sergio - Waste Management, Inc. Common S(NYSE: WM ) This is one on my buy list below $30.00/share. You have to look a bit outside the box where their past operating figures just do not represent their "possible" future efficiencies. What if the company could operate their fleet of trucks at 50% of what it cost them in the past? Would the company appear to you to be more valuable? Their FCF numbers would certainly increase as well as their net income. Natural gas vehicles catching on thefreepress.ca From the article:"...Waste Management is realizing 50 per cent savings, the trucks have similar range to diesel models, and the company looks forward to converting the rest of its 100-truck fleet, Sadler said...." Waste Management plans to convert fleet to cng by Pittsburgh Tribune-Review Thursday, November 17, 2011 pittsburghlive.com From the article:"...Waste Management Corp. plans to convert its waste hauling and recycling truck fleet at its Arden Landfill near Washington to run on compressed natural gas rather than diesel fuel, the company said on Wednesday...". WM to convert Columbus, Ohio, fleet to CNG wasterecyclingnews.com This is happening across the US in many of the WM service areas. The company is working on converting their fleet of diesel trucks to NG. This is being done w/o any government subside. It just makes economic sense (ie excellent ROI). I suspect this will become a longer term trend over time. This is one of these transforming "disruptive" technologies that makes several of these companies more efficient. Many of the pieces are already in place (like cheap NG from domestic shale) and efficient NG engines. This type of conversion should be done in our rail fleets too. For Waste Management, they will see significant cost savings over time as they complete more of these conversions over time. The company is also looking at new incineration technologies to reduce land fill waste and generate electricity. There are a lot of efficiency gains to be achieved in many of their operations as new types of technologies are integrated into their daily operations. Just "Google" Waste Management and Natural Gas and co-generation and waste disposal. This is a huge industry where waste collected now becomes a useful fuel and when processed through a more integrated system can create methane gas, generate electricity and even create fresh organic compost that is sold back to their customers. I think we are just beginning to see us reinvent some of these old companies/industries (it's always been done this way mentality) into very efficient 21st century integrated processing centers. EKS

To: Sergio H who wrote (45556)	11/21/2011 2:08:45 PM
From: E_K_S	Read Replies (2) \| Respond to 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