Week 7- Milestone 3-Investing Analysis
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Week 7: Milestone 3: Investment Analysis
1
Milestone 3: Investment Analysis
FIN 685
Professor Warren Wright
Southern New Hampshire University
Nicole Johnson
January 28, 2024
Week 7: Milestone 3: Investment Analysis
2
Waste Management (WM) and Republic Services are well-known in the waste and environmental services industry. WM is one of the largest companies providing integrated environmental solutions. They partner with customers and communities to manage and reduce waste from collections to disposal while recovering valuable resources and creating clean, renewable energy (WM, 2024). Republic Services is invested in similar standards as WM, and together the two companies lead the solid waste management sector operating 480 landfills out of the 2,627 landfills across the United States (Lee, 2021). Solid waste is inevitable, it’s always going to be produced, roughly 1,600 to 1,700 pounds per person every year, and looking at the number of people in the U.S. alone, that is a lot of trash that needs someplace to go. Being that it is an industry that isn’t foreseen to disappear anytime soon, investing opportunities are available and a good option to look at for beginners, investing in something solid that is a need is a good stepping stone. Companies like WM and Republic are in industries that are high in demand because the service provided is a need that benefits everyone, making them a safe risk to invest in. Regarding the company’s stocks and the perception of the markets, let's dive in. WM stock is currently at $185.81 (Yahoo Finance: NYSE: WM, 2024). Stock forecast has a high of $215, and a low of $163, making the average target price $186.29, which is a .26% change from the current price. Republic Services stock is currently at $171.29 (Yahoo Finance: NYSE: RSG, 2024). Stock forecast for Republic is a high forecast of $190, and a low of $160, making the average price $175.20, which is a 2.28% change from the current price. Even with the swings in the stock, and unpredictability of stock markets, as an individual looking at these averages, and highs and lows, it would be enticing from an investor standpoint, because the earnings per share (EPS) are still in a range of $1.48 - $1.58 and WM has beat its EPS estimate 50% of the time in
Week 7: Milestone 3: Investment Analysis
3
the past 12 months. Republic has EPS ranges of $1.22 - $1.38 beating their EPS estimate 100% of the time (tipranks.com, 2024). So, for those odds, from an investing standpoint, it would not be a hard decision to make to jump in on those numbers. As an investor, viewing the portfolio for WM and Republic Services, it wouldn’t be hard to choose to invest in either, or both. They are leaders in their fields and continue to grow and make savvy business decisions that lead to returns that grow and beat EPS estimates year-over-
year. Also being an industry that is considered essential, gives investors a security blanket type feeling, because the environmental safety and services WM and Republic Services offer are necessities to keep communities clean and healthy. The other services offered such as renewable energies by these companies are innovative and a large selling point. The perception of these markets is positive, and all ratings are pointing to buy currently, and still pointing to buy in the next 3-6 months as well. The 12-month forecast is projecting fair as well to buy and hold, a hold position isn’t a bad one, just allows for the compound interest to build and investors can take advantage of that. While performance isn’t guaranteed on future returns, the S&P 500’s inflation-adjusted annual average return on investments is about 7%. This
means, on average, the index’s value is 7% higher at the end of the year than it was at the beginning (U.S. Bank, 2024). These gains accumulate over the long term and provide advantages
to those who start long-term investing early. This leads to a strong portfolio, building compound interest and long-term investing shows the team that the will to take a risk is there and as a portfolio manager, it would intrigue, the willingness to risk and build to see a return. Asset allocation strategies are an important part of creating and balancing the investment portfolio. Recommendations for WM and Republic Services would be the best option to showcase the appropriate mix of stocks, bonds, cash, and real estate in the portfolio, and reflect
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the goals at any point in time (Catalano, 2021). The portfolio should reflect the goals the business has, and what direction they are intending to go. The portfolio should tell investors enough about the business and goals to allow them the option to an informed decision on investing. Regarding WM and Republic Services, the asset allocation that would give them the best results in my opinion is going to be constant-weighting asset allocation. This strategy is going to allow for the buy and hold that is recommended with the stocks for both businesses. It is also going to allow for the option to continually rebalance your portfolio, for example, if one asset declines in value, you would purchase more of that asset, and if it increases you would sell. With
this method, there are no hard-and-fast rules for timing portfolio rebalancing under strategic or constant-weighting asset allocation. Typically, the rule of thumb is that the portfolio should be checked and rebalanced to its original mix when any given asset class moves more than 5% from
its original value (Catalano, 2021). This allocation method would allow investors to review their numbers as they wished, adjust as needed, and allow them the option to build and hold stocks and watch closely how things are moving and flowing. The other strategies, like strategic asset allocation, do not seem to be as good of a fit as the constant-weighting option. With strategic asset allocation, one needs to know the risk tolerance and the time frame they are looking to invest, and this seems rigid, where the stocks for
WM and Republic are a buy-and-hold right now, and there is no definitive answer on how long to hold. Being that they are high-demand industries, the hold could be long, and the risk low or vice-versa, the strategic asset allocation seems like it’s a better fit for an established investor and not beginner-friendly because this strategy seems better suited for a diversified portfolio.
Week 7: Milestone 3: Investment Analysis
5
The remaining strategies, tactical, dynamic, insured, and integrated don’t seem like good fits either. Tactical seems like it’s too active, making it a better fit for short-term investing and flipping. The dynamic seems to rely on the portfolio manager’s judgment more than a target mix of assets, and integrated asset allocation accounts more for the investor’s risk tolerance and is a broader asset allocation strategy (Catalano, 2021). The only other one that would be a close second to consider using for portfolio building with these investments would be the insured asset
allocation, because this method relies on analytical research, forecasts, judgment, and experience
all of which would be available to look upon for a decision since WM and Republic Service are not new companies, and have established footholds and have built solid foundations that can be reviewed. A portfolio manager would treat these stocks aggressively, because of the nature of the businesses being a necessity, the risk of investing in them is low. The chance of losing money from the investment is minimal when you have a business that is in high demand for the services provided. The data to build a case study to show investors would not be hard to find and is readily available. As a portfolio manager, companies, and industries such as WM, Republic Services, and solid waste management sectors would excite from an asset allocation perspective. The capability to build a long-term investing portfolio and have the opportunity to grow compound interest and watch the investment build into something significant and meet goals set would make the job excitable. Overall, reviewing the analysis of these companies and reviewing the analysis of the competitors in the same market, investing in WM and/or Republic Services would be a no-
brainer. Both of these companies are leaders in their fields, paving ways with innovations and growing to be more sustainable, attempting to preserve natural resources and utilize the resources
Week 7: Milestone 3: Investment Analysis
6
that are growing and being created by the waste humans create. Turning trash into sustainable fuels, and energies to lower emissions and benefit the earth. Those standards alone would make the decision to jump on board and invest an easy one.
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References:
Catalano, Thomas. 2021. 6 Asset Allocation Strategies That Work. Retrieved on January 26, 2024, from https://www.investopedia.com/investing/6-asset-allocation-strategies-work/
Lee, Juhohn. 2021. The Garbage Industry Has Outperformed the Market Since 2015, Here’s Why. Retrieved on January 25, 2024, from https://www.cnbc.com/2021/07/22/how-the-
garbage-industry-outperformed-the-market.html#:~:text=Two%20private%20companies
%2C%20Waste%20Management,landfills%20across%20the%20United%20States
.
Tipranks.com. 2024. Republic Services (RSG) Stock Forecast & Price Target. Retrieved on January 25, 2024, from https://www.tipranks.com/stocks/rsg/forecast
Tipranks.com. 2024. Waste Management (WM) Stock Forecast & Price Target. Retrieved on January 25, 2024, from https://www.tipranks.com/stocks/wm/forecast
U.S. Bank Wealth Management. 2024. Should I Buy-And-Hold Stocks for Long-Term Investing? Retrieved on January 26, 2024, from https://www.usbank.com/investing/financial-
perspectives/investing-insights/buy-and-hold-long-term-investment-
strategies.html#:~:text=Grow%20with%20compound%20interest,on%20investment
%20is%20about%207%25
.
WM. 2024. Who We Are. Retrieved on January 5, 2024, from https://www.wm.com/us/en/inside-
wm/who-we-are
Yahoo Finance. 2024. NYSE: Republic Services, Inc. (RSG). Retrieved on January 17, 2024, from https://finance.yahoo.com/quote/RSG?p=RSG&.tsrc=fin-srch
Week 7: Milestone 3: Investment Analysis
8
Yahoo Finance. 2024. NYSE: Waste Management, Inc. (WM). Retrieved on January 17, 2024, from https://finance.yahoo.com/quote/WM?p=WM&.tsrc=fin-srch
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