"Street Critique"- Hilary Kramer, Personal Finance Editor, AOL
Wednesday, October 03, 2007PAUL KANGAS: My "Street Critique" guest tonight says you too can turn garbage into gold. She's Hilary Kramer, market strategist and author of "Ahead of the Curve." And Hilary, welcome back to NIGHTLY BUSINESS REPORT.
HILARY KRAMER, PERSONAL FINANCE EDITOR, AOL: Thank you, Paul.
KANGAS: In your book, you talk about spotting trends and tonight you say one of the biggest trends out there is the push to profit by recycling. Tell us more about that.
KRAMER: Well, when it comes to trends, recycling is a trend of the future because we don't have enough fuel, energy and certainly there's a big demand for commodities out there. So recycling is the answer.
KANGAS: Is this recycling trend one that will last for any length of time?
KRAMER: Absolutely. Because when I look at trends, it's all about efficiencies and creating momentum and money for companies and in this case, recycling improves the margins by reducing waste and costs for companies and, therefore, stock prices go up.
KANGAS: Well, speaking of some stocks, you have some choices here that you think will benefit from this trend. First up we have Covanta Holdings.
KRAMER: Yes, Covanta, the ticker symbol is CVA and this is one of my favorite companies. I own Covnata. It's a core holding. It's backed by a man, Sam Zell (ph), who you know developed a real estate fortune, $39 billion and he's said now the future now is waste energy and Covanta does just that with its land fill, takes garbage, takes trash and it turns it into energy and the reach is going to Europe, to Asia, and they also do water facilities and management as well. I love Covanta at $24. Certainly I have a $30 target, maybe higher if the government starts providing subsidies for recycling.
KANGAS: Your next choice you say many people thought was actually a real estate play.
KRAMER: Alico, the symbol there is ALCO. Alico is $49, was once a $65 stock in the past year, but it came off because its 168,000 acres of land in Florida was seen as a pure real estate management play but it is not. Alico is an agricultural play. This is about agriculture to fuel and this is about taking orange groves, grapefruit, tomatoes and sugar cane and turning it into energy. They have a $33 million Department of Energy grant to look at different ways to get into the cellulosic ethanol area and to create bio-fuels and to recycle all this agricultural waste.
KANGAS: Then one of your choices is also a big cap stock.
KRAMER: Yes, that's Waste Management, (WMI) is the ticker symbol there. Waste Management provides a 2.5 percent dividend yield and it's an 800-pound gorilla of garbage pickup. They're 26 percent of the market share but the catch here is that Waste Management is entering into the recycling arena and therefore, that will improve the company's income, the margin and the valuation is based on that so I see Waste Management continuing to rise and be a very, very good investment, especially if we have a recession. You still have to pick up the garbage on the streets.
KANGAS: We just have 30 seconds, Casella Waste is one of your choices and it's had quite a run up.
KRAMER: Yes, Casella Waste, I talked about Casella before, CWST, about $14. I see Casella going to $20. It could be an event play. There could be a takeover here because it's a $300 million market cap trash garbage pickup company that does recycling. It turns waste into energy. It's in the northeast and it could easily be taken over by a 20 billion- pound gorilla like Waste Management.
KANGAS: Do you own any of the stocks you've mentioned or have other disclosure to make Hilary?
KRAMER: I own all of these stocks except for Waste Management, WMI.
KANGAS: OK. It's always great to see you and good to have you back again.
KRAMER: Thanks Paul.
KANGAS: My guest Hilary Kramer, personal finance editor at AOL and the author of "Ahead of the Curve."
