Devina Rankin is the CFO and SVP of Waste Management (WM), the largest waste services company in North America. In this episode of The Stock Podcast, Devina provides a brief history of the company and a great overview of the waste management business. Tune in if you’d like to learn about the waste management business, the recycling industry, and how landfills work.
I realize that Waste Management probably doesn’t need an introduction. Just about everyone out there has probably seen WM’s big green trucks driving around town. However, the waste management business is much more than just picking up trash. There’s a lot that goes on behind the scene that we don’t see. Running a waste management business is very complex, and that’s why it’s great to have Devina on the program to describe how they grew to become the leading waste services provider in North America.
Just a little background regarding my relationship to the company and Devina Rankin, I used to cover the waste services companies when I worked on the buy side. Full disclosure, I was neutral-rated on the entire space. The reason is that the current valuations outstripped historical metrics, and because the free-cash-flow profiles weren’t juicy enough to entice the value-investor in me. But, man, was I wrong about the waste services industry. I believe WM’s stock price was around $60/share when I first launched, and the stock price today (at the time of this update) was $115/share.
I think part of the reason for the significant outperformance in WM stock has been the shareholder return story, which Devina Rankin describes during the interview. Another reason could be a concept that George Soros outlines in The Alchemy of Finance, which relates to compounding returns. WM, like other waste companies, have a low cost of capital and high multiples. By using their share currency to buy businesses at lower multiples, and by extracting synergies, these companies can compound returns at an exponential rate.
