We recently compiled a list of the 10 Best Recycling Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Waste Connections, Inc. (NYSE:WCN) stands against the other recycling stocks.

Imagine living in a society where all kinds of waste are converted into useful resources that power sectors like construction, energy packaging, and automotive while reducing landfill clutter. That’s the reality as calls for sustainability fuel recycling in the race to protect the environment and resources.

Consequently, the waste recycling services market is experiencing robust growth amid increased awareness of environmental sustainability, stringent waste disposal regulations and increased focus on resource conservation. With the recycling services market projected to be worth $78.43 billion by 2028 (as per The Business Research Company), there are tremendous opportunities to unlock by focusing on companies that are involved in the space. Companies investing in advanced automation, from robotic sorting arms to efficient picking trolleys that streamline the segregation of materials, are poised for significant growth in the burgeoning recycling industry.

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One of the key areas with tremendous potential in the recycling business involves plastic purification so that it can go back into the circular economy. Katherine Ogundiya, an analyst at Barclays, believes the crop of companies working on plastic recycling has been overlooked, yet they possess tremendous upside potential. “Advanced recycling has immense potential to transform the plastic waste crisis,” she said in a research note to investors.

The metal recycling market is growing significantly, primarily driven by the increasing demand for consumer electronics. Electronic waste is produced in tandem with the growth in the production and use of gadgets like smartphones, laptops, tablets, and home appliances. Essential metals that can be recovered and recycled, such as copper, aluminum, gold, and silver, are present in these devices. To preserve natural resources and lessen the environmental impact of mining and processing new metals, it is essential to recycle metals from e-waste.

The Environmental Protection Agency announced $2.6 billion in newly available funding for drinking water infrastructure through the Bipartisan Infrastructure Law to accompany that rule.

Based on data gathered in 2021, the Environmental Protection Agency projected in a report to Congress last year that the United States will require $625 billion in investments over two decades in drinking water infrastructure. The investment should also benefit companies engaged in the water recycling business by 2030.

The recycling sector is a prime example of how profit and the environment can coexist at a time when sustainability is a major topic of discussion worldwide. In addition to promoting a greener future as we move toward a more circular economy recycling companies offer access to a thriving market with substantial growth potential.

We’ll introduce you to some of the most notable waste management and recycling companies in this article. These businesses spearhead change and present astute investors with exciting prospects of long-term shareholder value.

Our Methodology

To compile the list of the best recycling stocks to buy according to hedge funds, we used a stock screener to find waste management and recycling companies. We then selected the stocks that were the most popular among elite hedge funds, as of Q2 2024. Finally, we ranked the stocks in ascending order based on the number of hedge funds that held stakes in them.

At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Waste Connections, Inc. (NYSE:WCN)

Market cap as of November 7: $46.34 Billion

Number of Hedge Fund Holders: 50

Waste Connections, Inc. (NYSE:WCN) is a waste management company that provides nonhazardous waste collection, transfer, disposal, and resource recovery services. It owns and operates transfer stations that receive, compact and/or load waste to be transported to landfills or treatment facilities.

The company’s competitive edge, which has strengthened its prospects in the solid waste and recycling services sectors, stems from its aggressive merger and acquisition (M&A) strategy, which has earned it a solid reputation. Consequently, it’s been able to diversify its service offerings and increase its market presence. With more acquisitions anticipated to close later this year, the company has acquired companies with annualized revenues of about $500 million.

Thanks to the aggressive merger and acquisition strategy, Waste Connections, Inc. (NYSE:WCN) delivered solid third-quarter results on October 28, 2024, with net income increasing 34.5%  yearly to $308 million. For the nine months of the year, the company has registered a 27.9% increase in net income to $813.6 million. Waste Connections is well positioned for another increase in its full-year earnings owing to solid waste operations pricing and growth, which affirms why it is one of the best recycling stocks to buy.

Management expects innovative approaches to continue driving employee engagement and retention improvements, leading to above-average underlying margin expansion in solid waste collection and increased shareholder value. While trading at a price-to-earnings multiple of 23 slightly lower than the Industrials sector average P/E of 27, Waste Connections, Inc. (NYSE:WCN), rewards investors with a 0.71% dividend yield.

Overall WCN ranks 1st on our list of the best recycling stocks to buy according to hedge funds. While we acknowledge the potential of WCN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WCN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.