 Good day fellow investors. Today will be a bit different form than you might be used to but there is a lot more than investing that can be just shown in a video. And in this video, our podcast, I want to show what I did over the last weeks where I analyzed the waste management sector. And detailed, I made a detailed analysis on 15 stocks in the sector because I really wanted to dig deep into this sector because as the population is growing, as the global economy is developing, there is more and more waste and I want to see whether there are some positive tailwinds in that environment. Recently I saw a Bloomberg article discussing how the smoking, the tobacco industry, has seen its first decline in male smokers over time. But then what I focused on, okay look at the number, the increased number of smokers over the past 20 years, tailwind consequently tobacco stocks did extremely well and were one of the best investment over the last 20, 40, 40 years. Now things are changing. So I want to see in the waste management industry whether there is something interesting or not or whether I can find some great investments. When I start with such an analysis, I usually start with a sector overview first to see what's going on, the waste management, what are the prospects for global growth, what do the trends mean to a value investor, what are the risks also and then see how can that analysis, the sector analysis be applied to a long list of stocks. This is the report for the developed market stocks and then I plan also to make one for waste management and related companies in emerging markets that might be more interesting. But to understand the sector well, I first have to learn about the developed markets, what happened, how did those stock prices behave, how did the businesses evolve, where can modes be created, competitive advantages that are going to give me a durable investing advantage over the long term, even if it might be stinky as we are talking about rubbish. So when I started researching, also some funny facts, just that an American throws away 2 kilos or 4.4 pounds of rubbish every day garbage, however you want to call it. So looking then at reports, when you start with the sector analysis, you look at reports, I looked at the world bank and then I tried to compare what's going on in developing markets, emerging markets where just $35 are spent per year versus $300 and more spent in high income countries on waste management. So very interesting and huge potential for increase in low income countries over the long term. And then, okay, projected global waste creation generation. It is a tailwind. It's a growing trend, unfortunately, despite the recycling, the everything. That's also waste management. So it's all about how much you move, how much you recycle. And even if it's not growing, the waste will not grow. Perhaps the recycling will go, which will be another investing opportunity and tailwind to look at. Further, also if you look at the population in cities, the urbanization, more and more people in living cities, and that's somewhere where you can organize waste management, improve efficiencies of scale, and of course, charge that. If we look at the expected costs by income group, really, there will be huge growth in all sectors, also from low income countries to high income countries, as waste management will cost more and more. So in general, we see very, very positive trends in the environment. As I said, urbanization, population. If you want to read this report, there will be one link in the description of the video. So if you prefer reading, have fun. And in this podcast, I'll just give you an overview of what's going on, a little bit of commentary, just to comment on how I do stock market research, sector research analysis, to find investments where I can invest in. And then also investing is always about risk and reward. So there is also the downside of investing into waste management stocks. And then everything can happen, economic cycles. I thought waste management was more like a defensive sector where it doesn't really matter what happens to the economy as you always make waste. But in reality, it is closely linked to economic cycles, less industrial production. So also when you look at those stocks, if you are invested, it is really dependent on what's going on in economic cycles. So then it's related of what's going on with local municipal governments and their finances. Then about the trends where what's going on in the countries, what's dumped in landfills, what's openly dumped, what's recycled, etc. Legislation costs, new billing systems. So there are also a lot of risks and you have to understand them and see how each business can navigate the risks and rewards in the future. So over the long term, the conclusion is that growth might come from Asia and Latin America, but with China and Brazil the biggest growth markets. But before going to those markets, I first analyzed 15 waste management stocks from developed markets. There is also a waste management stocks Google sheet list with all the financials that are there in order to give you really a great overview of what's going on. And you can click that and you have all the ratios for the last few years, how that evolves, the calculation on the value compared, the intrinsic value compared to the stock price for those who love more numbers. Then let's start with a company, Advanced Disposal Services is a company that was recently acquired by waste management and the key here is, okay, stock price 43 and then you are looking, okay, what did waste management pay for it? Because then we see, okay, what could be the value of such a company in the process of consolidation where the big players acquire the smaller players in order to achieve more economies of scale. So when I looked at the numbers, I think they were happy with the price earnings ratio of 5%, that's normal for them if you can borrow at 4%, that is a great business. So this company will be delisted, but investors investing in the company had a great return over them, not even so great, but let's say, okay, 5% return price earnings ratio of 20 is what you can expect as a target and when probably it pays to get out of the investment. Then Clean Harbors, another stock, a lot of different businesses, but the price earnings ratio is 26 and for me it's a bit high in the current environment. Also free cash flow yield is 4.5%. So what I'm seeing here is that a lot of companies in developed markets are exuberantly priced even, but that wasn't the case always. So there is always a lot of volatility. Clean Harbors was practically 50% lower just a year ago, a little bit less, okay, but you see there is volatility, exuberance and panic depending on what's going on in the economy and this shows the close relation to economic cycles, which is something to keep in mind because it might present an great investing opportunity over the long term because after all we all have to eat and we all make waste, wish it or not. Then Covanta is a very interesting company that likely possible also to go bankrupt, but likely to first have a dividend cut. They also operate waste, energy from waste facilities, which is a very interesting business, but depends on so many many moving factors that can the situation can really get ugly. They are investing now in the UK after not have been doing that good in the United States and you can see that the stock price didn't go far over the last what is 14 years. So they have been paying a dividend over the last years, but the dividend is not covered, the book value continues to go down. So it is a very very risky situation with an unlikely upside. The stock is probably held up by ETFs, high dividend yield ETFs or dividend buyers that just look at the dividend and don't see about the business. The market cap isn't that big, so it can be held by a few fans. For me simply too risky even if they have a mode, but I have seen how can also missing where you are going to invest in this case energy from waste and then how things move, how the contract that prices you have can decline. Renewals of contracts that come in 2024 makes things very risky and not a tailwind, not a competitive advantage, which is what I'm looking for when it investing. I don't have to invest in every company, I don't have to know the intrinsic value of every company, I just need a few for my portfolio. So this was too risky, Donaldson, another safe sound and boring bet, but can be a bad investment because the dividend yield is again very low, the price earnings ratio is close to the 30s. So any volatility in the stock price like it was the case in 2016 and 2009, volatility in the economy can really push the stock price down. So for me it's simply too risky and exuberant pricing now for these waste management companies. And then if you look at the growth, the stock price growth has been really stellar, but economic growth, revenue growth, isn't that big at all. Earnings per share perhaps increased 10% since 2012, 15%. That does not justify the increase in the stock price. So I consider this exuberantly priced. Another waste management company that is exuberantly priced, but they market themselves very, very good. So constant dividend growth and this is something you can easily sell to a lot of investors because investors then estimate that the growth will go on forever. Might, might not, but when you are related to construction, industrial, on-road trucks, then you know that your business will be volatile in relation to economic activity, as we have seen during the last two recession scares. Evoca Water Technologies provides water treatment, equipment and services, filters and who knows a lot of things. So it's a recent IPO and it behaved as many recent IPOs do. But then when you look at those interesting IPOs you can always find the gem. Therefore it's also good to look at IPOs and I have to push myself to look more at IPOs. And even if you look at 50 IPOs and there was all garbage, perhaps the 51st might be something. Now the business overview, it looks very, very good, slowly growing, but growth has stalled a little bit and it is not as it was expected at the IPO. They made some acquisitions, they sold something, but here is something that makes me think and wonder about this company. The fresh cash flow, adjusted net income, adjusted EBITDA, all where I look is just adjustments, adjustments, adjustments, so you really don't know what the real numbers are. And when you see so many adjustments then you start thinking that perhaps these guys made an IPO just to reward the management, not really thinking about rewarding long-term shareholders or new shareholders. Actually tangible assets are 1 billion, while total debt is 1.3 billion, thus aqua stock, tangible value is actually negative. So this is again too much risk for me and given the adjustments, given all the mambo jumbo with the finances, I wonder whether the management is really oriented to shareholders. Now very interesting Japanese company and they expect to grow extremely over the next 10 years that margins are going to improve and their sales improve a few times. I don't know from where they think they will manage to do that, but if we compare it to the American companies the price earnings ratio is also already much much lower and in the tens, sorry didn't put the financial financials here in, but doesn't matter price earnings ratio about 12, which already gives you a better return, but these are their projections. So price earnings ratio of 12 and if they tell me that they will improve the black line operating margins from 4% to 10% and double their revenues then this must be a great investment. Probably it will go up 5 or 10 times over the next 10 years. So that's very very positive but as a typical Japanese companies I haven't found any mention of how they are going to reward shareholders over the next 10 years. So it might be again typical Japanese business where they just invest to improve the business and improve their sense of doing business, but not really rewarding shareholders. I also don't know how are they going to do it, how are they going to improve margins as like the competition is not going to do anything and they are going to expand across the globe, but why do they think that the competition will not compete? And also they expected sales of 430 billion yen, actual sales 390 billion, so it's not that they are reaching easily their growth forecasts and targets. Who knows might not be not a bet I'm going to look because I didn't find any competitive advantages that they have and the market is also on my side. They are not seeing that the management will succeed in their plans. The stock is 50% down since 2014 and even more from earlier. Then Suez Environment Company is a French-based utility company, so this is now switching to Europe. Water treatment, waste management, again another stock that didn't do much over the last 10 years. It was also much much lower in 2013, but here you have typical European company 4.7% dividend which is much much higher than what we have seen tonight today, but price on x ratio is 20, so dividend yield is 100% payout. They have made a turnaround plan for 2030, how they are going to improve, but I see a lot of empty words how to best serve clients, commitment, data and things like that. So everybody is very ambitious, but the market isn't really giving them the right for their ambition. Revenues have increased, but margins have declined. Book value increased a little bit and free cash flow has was relatively stable over the last 10 years. How is this going to end up? I don't know, but for me these are really complex old-fashioned European companies where I don't see positives for Europe, I don't see positives for them expanding globally because why would someone in I don't know Vietnam be very happy to give the best investments to a European company where when they can keep them for themselves. Similar for Violia, again a company that didn't do good, didn't do that much for shareholders except if you bought let's say in 2012 amidst the Greek crisis in Europe then you could have done pretty okay, but that's not really what I'm looking when it comes to investing. I'm looking for businesses that will deliver based on some competitive advantage, based on some margin of safety, based on something great, not just based on something that okay we have to do business because we did it over the last 50 years and we want to continue to serve because there is business demand, but not much profitability. They're trying to do things, improving the dividends, but I don't know for how long can that last. Going back to the States, waste management and this is very interesting, this chart. For 20 years nobody cared about waste management stocks. The stock as you can see didn't do much for 20 years 1992 till 2012 and then it suddenly exploded and this is where I like to do my investment research because when I collect the knowledge then perhaps I'll be ready when the time comes to take advantage of those sectors that are about to explode where something is changing, especially in these boring sectors like waste management. Okay now we see the explosion and the price earnings ratio of 27 dividend yield below 2% so now it's definitely exuberant, but those that invested in 2012 and were happy when the price earnings ratio was just 10-12, the dividend was a little bit higher. Those achieved great returns and that's actually what I'm looking for. I'm looking for overlooked sectors that have a good current business yield, some growth ahead from positive tailwinds that can be re-rated by the market. If it happens okay, if not I'm happy owning the business like waste management at what is this 32, does the dividend yield now on the 32 for those that bought in 2012 would have been around what 8-9% which is very very good. What made waste management so interesting to the market? Well scale and modes. Landfills have modes nobody wants a new landfill in their backyard and scale as the company grew as they found the hauling efficiencies etc. it became more and more profitable so this is what I'm looking for not in this case with waste management but perhaps with other companies. When you look at the business gross margins improved but they don't grow that much because it is a developed market so it's very hard to grow there. Price earnings ratio was 12 in 2010 now it's 27 so really really exuberant plus then they are also at risk of a recession of an economic slowdown so for me too risky. Over the long term since 1990 given the modes that you have when you make those landfills and invest in that they are a 40 beggar which is a great return and those that invested the right time in this company will probably achieve also great returns perhaps not 40 times what this company did over the last 40 years but if you follow it closely and buy when the market doesn't like it then you can make great returns. Similarly to waste management Republic services another fairly exuberantly priced service that exploded from 2012 waste management company that exploded from 2012. Arkadis 2.46 dividend yield but the stock didn't do much since 2007 it's a Dutch global design engineering and management consulting company based in Suidas Amsterdam and they're doing the projects for all those infrastructures that depend on investment in Europe. They did okay revenue grew doubled over 10 years but so also did shares increase so I might wonder whether they are rewarding the management or shareholders. Shareholders in Europe might be happy with 2% dividend but given this is a project company I don't see a competitive advantage. Waste connections same as waste management there is a mode everything looks great good business but extremely expensive they did grow faster through acquisitions so that is why the spikes are sharper than with waste management but then again too expensive. Now waste management also the waste management ETF the time using the list here looks also at healthcare stocks so stairs PLC another good business looks like a good business a little bit overvalued they have recurring revenue from the equipment they sold that they sterilize over time so stable business healthcare should do good but then again 2012 and then everything exploded now it's too much for me to pay 48 times earnings for earnings growth of just 5 per year so again it was a boring company for 15 years and then it exploded. Stereocycle similar company but you see here the risk of investing in waste management stocks when the growth stops if the company did something wrong if they invested wrongly if they cannot keep up with the growth then it becomes a very very ugly situation and this is this explains the risk that I'm talking about when I'm mentioning the risk of exuberantly priced stocks like waste management also very very large debt so that is something that you have to always be very careful and it's risky to invest in companies with a lot of debt as long as things go well debt is good because it leverages what you are doing but in business there are always so many moving parts that you never know how it will end and when you're live leveraged it will likely end up badly then and it's an interesting business that has been delivering returns to shareholders 74 years of consecutive cash dividends so very interesting business but I'm wondering whether this is something competitive that I want to own at the price earnings ratio of 40 so cleaning waste management cars and whatever this is how this is called I don't know but I don't think there is a competitive advantage especially with the company that will be highly exposed to the industry as new buildings are built as everything is required then you need these instruments if not then demand is less at a price earnings ratio 40 no thank you so I'm going to continue with the research look for emerging markets I have learned a lot by looking at in detail at all these waste management companies and in this video I just wanted to give you taste of what I do how I do it if you want to dig deeper into what I do if you want to read the report that will come up on emerging market stocks and if you like my approach of looking for great businesses with the mode that will deliver returns for the long term and keep growing plus having a margin of safety plus having already value you might check my stock market research platform and the link will be in the description below well I hope you have given you a taste of what I do let me know in the comments what you think of this and I think I'll be seeing you in the you'll be seeing me in the next video thank you