Podcast Summary
Waste Management Industry's Role in Daily Lives and Economy: The waste management industry, led by Waste Management, is poised for growth due to increased trash production as businesses reopen. With a focus on sustainability through natural gas-powered trucks, the company is well-positioned to capitalize on this trend.
As people return to offices and businesses reopen, the waste management industry, specifically Waste Management (WM), could experience growth due to increased trash production. This industry, while often considered unsexy, is a dominant player in the US market, generating revenue through trash collection for residential, commercial, and industrial sectors. Additionally, Waste Management manages landfills, recycles materials, and even generates natural gas from their processes. With the potential increase in trash, this could be a catalyst for growth in the industry. Waste Management, as the dominant player, is well-positioned to capitalize on this trend. The company's vast fleet of natural gas-powered trucks is an added bonus, making their operations more sustainable and environmentally friendly. Overall, the waste management industry is an essential business that often goes unnoticed, but its role in our daily lives and the economy is significant.
Factors driving Waste Management's revenue growth in 2021: Waste Management's revenue growth in 2021 was 11% higher than projected, possibly due to people returning to work and increased economic activity. However, growth rates have since decreased, and the company's history of steady growth and status as a dividend payer make it an attractive investment option.
The revenue growth experienced by Waste Management in 2021, which was 11% higher than projected, was likely driven by a combination of factors including people who returned to work and the secondary and tertiary effects of increased economic activity. However, it seems that much of this growth may have already occurred as the company's revenue growth rates have since decreased. Additionally, Waste Management's history of steady revenue growth and its status as a dividend payer make it an attractive investment option for those looking to balance their portfolio with a reliable, low-volatility stock. Over the past 10 years, the company has seen an average annual growth rate of around 16% before dividends, with its stock price more than doubling over the past 5 years.
Investing in unsexy businesses: Unsexy businesses dealing with waste, pest control have steady revenue growth, high profit margins, and recurring subscriptions, making them profitable long-term investments
Unsexy, seemingly boring businesses can be profitable long-term investments. Waste Management and Waste Connections, companies that deal with waste and pest control respectively, are examples of such businesses. Despite dealing with seemingly unpleasant subjects, these companies have steady revenue growth, high profit margins, and recurring subscriptions from customers. Waste Management, the largest owner of landfills, has a monopoly in its industry and a strong track record of growth. Waste Connections, though smaller, has similar growth patterns and strong financials. Another example, Rollins, the owner of Orkin pest control, deals with pests and critters but has a subscription-based business model, high profit margins, and a long history of paying dividends. These unsexy businesses may not be exciting, but they can provide steady returns for long-term investors.
The Power of a Positive Perspective in Investing: Maintaining an optimistic outlook and giving companies the benefit of the doubt can lead to better investment outcomes, such as holding onto stocks for longer periods and potentially compounding returns.
Our attitudes and perspectives towards events, including in the context of investing, can significantly impact our actions and outcomes. The concept of giving someone the benefit of the doubt is rooted in attribution theory, which is the study of how people assign causes to events. According to Alicia Hammond, a user experience researcher at The Motley Fool and a psychology instructor at Cuesta College, an optimistic attributional style is associated with better outcomes in various aspects of life, including health and relationships. In the context of investing, a pessimistic approach might lead to more frequent trading based on minor setbacks, while an optimistic perspective could result in holding onto stocks for longer periods, allowing for potential compounding of returns. The success of long-term investments, like Sherwin Williams, which has returned over 1600% since 2008, underscores the importance of maintaining a positive outlook and giving companies the benefit of the doubt, especially in a skeptical market environment.
Understanding emotional attachments to investments: Investors' emotional connections to companies can hinder their ability to make objective decisions, leading to cognitive and emotional challenges when it's time to sell. Recognizing these psychological factors can help manage emotions and make informed investment decisions.
The way people perceive and attribute the performance of their investments can significantly impact their decision-making process. Some investors develop emotional attachments to companies, and selling a stock can feel like going through a breakup. This attachment can lead to cognitive and emotional challenges when it's time to sell, as investors grapple with changes in the company or their feelings towards it. These challenges can be similar to dealing with red flags in a relationship, such as incompatible values or significant changes. Understanding the psychological factors that influence investing behavior can help individuals make more informed decisions and manage their emotions effectively.
Give companies the benefit of the doubt: Adopt an attributional style to build trust with companies and consider external factors before making decisions.
When it comes to investing, it can be helpful to adopt an attributional style that gives companies the benefit of the doubt. This means recognizing that a company's behaviors may be influenced by external factors rather than being fundamentally misaligned with our goals and values. By thinking of companies as friends and giving them the benefit of the doubt when faced with negative situations, we can build trust and potentially stick with them for the long term. However, it's important to do a gut check and consider if the company is still aligned with our investing thesis. If not, it may be time to move on. This approach can make dealing with complex investing situations feel less overwhelming and more manageable.
