Landfill management and trash hauling aren’t glamorous endeavors, and as such, investors often gloss over opportunities in this space.
Think about all the thematic exchange traded funds on the market today. That expansive, growing universe is essentially bereft of waste management-related opportunities — except for the VanEck Vectors Environmental Services ETF (EVX).
EVX follows the NYSE Arca Environmental Services Index, and while investors don’t view this ETF as a typical environmentally aware offering, they might want to rethink how they look at EVX, which turns 16 years old in October.
Actually, EVX has more sustainability credentials than meet the eye. Consider Waste Management (NYSE:WM).
Waste Management “said (last) Thursday that it would invest $825 million over the next four years to turn methane from garbage dumps into biomethane, a natural-gas substitute. Waste Management, or WM, said the funds will bring 17 new projects online across the U.S. and Canada by 2026, adding to the 16 it currently runs,” reports Dieter Holger for the Wall Street Journal.
There’s something to the Waste Management magic, as the stock is outperforming the S&P 500 by about 1,200 basis points this year. That’s relevant to EVX investors because the stock is the ETF’s second-largest component at a weight of 10%. On the environmental front, the renewable traits of biomethane shouldn’t be overlooked.
“Biomethane, which companies refine and capture from decomposing waste using wells and pipes, is often called renewable natural gas because it comes from organic sources and can displace fossil fuel. Capturing methane reduces emissions of the greenhouse gas, which is shorter-lived but far more potent than carbon dioxide,” according to the Journal.
Some other EVX components could make their presences felt in the biomethane arena. Those include Waste Management rivals Waste Connections (NYSE:WC) and Republic Services (NYSE:WSG). While it remains to be seen exactly how far landfill managers and trash haulers delve into the renewable arena and if end users are accepting of those efforts, that doesn’t dent the viability of EVX as a buy-on-the dip candidate.
As noted above, Waste Management is sharply outperforming the broader market this year. So is Republic Services, while Canada’s Waste Connections is actually higher on a year-to-date basis. That trio combines for about 30% of EVX’s weight. Overall, the fund holds 24 stocks, roughly 91% of which hail from the industrial and materials sectors, the latter of which is performing admirably this year.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
