Green Investments

Environmental protection is no longer just a theme heard in liberal forums. Rather, to the contrary, conservation methods have spread rapidly across our nation and the globe. The mantra “reduce, reuse and recycle” is repeated daily in businesses, households, municipalities and counties. Nonprofits and charities have jumped on the theme, collecting donations of electronics, including discarded cell phones and used ink cartridges that can be converted into cash through agents connected with the recycling industry. It is indeed a fact that there is big money to be made in recycling.

Recycling is a growing industry, and where there is big industry, there is the potential for investors to make healthy returns. A host of publicly traded recycling companies are poised to take advantage of future growth. Depending on the statistics that you to cite, from 10 percent to 15 percent of the recyclable materials available for recovery has been tapped. There is significant room for improvement.

For the average investor on the street, what are the top five recycling companies that should be considered the “greenest” for 2013? A good guide for answering this question is the highly revered investment management “gurus” at “The Motley Fool,” their stated mission being “to educate, amuse and enrich” their audience. They list and rate 13 recycling industry leaders. The stock returns for the past five years are compared in the accompanying chart for their most highly rated “Top 5” picks.
 
The real “darling” over the period has been Darling International. It has nearly doubled in price in five years, recovering from its recessionary lows and outperforming the S&P 500 index, which broke even for the five-year period. More importantly, for the past 12 months, Darling International (DAR), Commercial Metals Co. (CMC) and Nucor Corp. (NUE) have tracked or outperformed, in that order, the S&P industry benchmark.

Industrial Services of America (IDCA), Louisville, Ky., and Metalico Inc. (MEA), Cranford, N.J., have both lagged but show signs of better days to come.

Attempts to construct an industry ETF (exchange traded fund) for recycling have not drawn the support necessary to use them for comparative purposes.

Here is a brief profile on each company:

• Industrial Services of America is engaged in recycling stainless steel, ferrous and non-ferrous scrap, providing waste services as well. Founded in 1953 and headquartered in Louisville, Ky., it has a market capitalization (total value of tradable shares) of $25 million.
• Darling International Inc. is focused on rendering, cooking oil and bakery waste recycling and recovery solutions for the food industry. Founded in 1882 and based in Irving, Texas, it has a market cap of $2.2 billion.
• Nucor Corp is engaged in the manufacture and sale of steel and steel products in North America and internationally. Founded in 1940 and headquartered in Charlotte, N.C., it has a market cap of $12.2 billion.
• Commercial Metals Co. is engaged in recycling, manufacturing, fabricating and distributing steel and metal products and related materials and services in the United States and internationally. Founded in 1915 and headquartered in Irving, it has a market cap of $1.6 billion.
• Metalico Inc. is engaged in scrap metal recycling, platinum group and minor metals recycling and lead metal products fabrication activities, primarily in the United States. Founded in 1997 and based in Cranford, N.J., it has a market cap of $127 million.

The “Top 5” picks are an assortment of large and small companies, ranging from current market capitalizations of $25 million to $12.2 billion. 

Be sure to complete your own research on these firms before investing, and remember that the past is no guarantee of future performance.
 

Tom Cleveland is with ForexTraders.com, a social network for currency traders that provides news, charts and articles for beginner, intermediate and advanced traders.