Seasoned investors know that within the broader group of industrial stocks, there are scores of familiar and appealing companies and plenty that check both boxes. The familiar category includes airlines, railroads, and other transportation entities.
On the alluring side of the ledger are defense contractors, many of which are soaring as global defense spending does the same. Plus, the industrial sector landed a compelling refresh with investors displaying enthusiasm for drone and space stocks, among other next-generation industrial concepts.
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Rarely do investors’ industrial sector bingo cards include waste haulers, but Republic Services (NYSE: RSG) is a great example of why that thinking should change. Only time will tell if $5,000 allocated to this trash removal company will morph into $1 million, but the ingredients are in place for significant long-term appreciation.
As the old investing saying goes, “History doesn’t repeat, but it often rhymes.” With Republic Services, investors will happily accept a sequel to the last 10 years, because over that period, it outperformed larger rival Waste Management (NYSE: WM) as well as the industrial sector and the S&P 500.
That’s proof that market participants don’t always need to embrace glitzy, high-growth stocks to generate attractive long-term returns. Something to consider with Republic Services: The stock may be just as dependable as the service the company provides. While industrials are often viewed as cyclical stocks tied to the health of the economy, whether in a raging bull market or a deep recession, there’s demand for the services Republic provides.
At least two factors support the bull thesis on this stock’s durability. First, trash haulers usually ink long-term contracts with the communities they serve. That provides clarity to investors, and if there’s anything investors love, it’s clarity. Second, rising populations and more people moving to cities provide runways for expansion.
On the demographic note, Republic operates in nearly every U.S. state and Washington, D.C., indicating it has some buffer against population declines in some regions because some of the fastest-growing states, including Florida and Texas, are on its roster. In fact, the company’s ability to scale, particularly in recycling and regulatory mandates, positions it to steal market share from smaller rivals in rapidly growing regions.
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