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Can the Refuse Industry Continue to Grow

Can trash companies become even more efficient in the future to save costs and increase profits? It might be difficult as they are already robotic, have GPS systems and routing software. Yes it is true many new innovations such as the Pacific Norwest Laboratories and the DOE have discovered ways to increase productivity and traffic flow by understanding issues and controlling sequential and numerical divisions between peak and capacity. And yes if that industry would stay with it they could increase their efficiency and of course due to the great rewards of the past they did.

Such as the greatest innovation in trash collection by truck in the last three decades was the custom trashcans coupled with the truck mounted hydraulic lifts while the driver can stay within vehicle and collect more trash per hour. Big difference and made a world of exploits for shareholders equity, quarterly profits and retained earning to further expand the intense consolidation years of that industry. So where are we today? In 2001 consumer spending had slowed.

We know this due to watching the consumers and their choices on the menu of our detail shops at the Detail Guys www.detailguys.com , A company I run. Because people love their cars and continue to spend when they forgo other things such as Fast Food QSRs and other types of businesses, we know if we are hit by incremental consumer slow downs things are getting tighter and can easily predict severe recessions some 6 months out. First hit is higher priced items, last hit is lower prices consumables and favorites of people including the vices industries which I will have to at this point add Caffeine. Yes Starbucks. Starbucks is not immune but should be able to ride out any economic storm until things return in any economic recession. They also have advantages of getting 1.3 Billion Chinese hooked on caffeine, like the tobacco industry did with cigarettes.

Trash companies are hurt in that their best customers are those, which are business properties such as the property management companies looking to stay solid in harsh times even though it will never happen. Those companies like Trammel Crow, Carr America, and etc. with a large amount of investment capital tied to their percentage of cash flow from under performing business and retail income properties. If you look at the largest insurance companies you will see their dissolving positions of the largest REITs in Q3 and Q4 of 2003 with a 15% drop in REITs in first quarter of 2004. With this happening you can understand that they do not feel comfortable in non-performing current investments. Some large property owners will use this as an opportunity to buy up properties on the cheap or in foreclosure, bankruptcy or like the S and L days from the government. Meanwhile empty buildings use less trash services and less property management services.

When you take away the highest yielding market mix of a trash refuse company, where can they make it up? They cannot without diversifying into other services. Some smaller ones have such as into recycling which has done well and tends to do well in recessions. However it costs more many times recycle than to produce new. All these things should be considered if you are looking into a long-term buy and hold position in garbage stocks. Think on it.

"Lance Winslow" - If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/wttbbs

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