In my next “Shallow Dive” I’m going to discuss Waste Management. $WM surprisingly has a very durable moat despite being a garbage company. Waste Management is a fully integrated waste-hauler and its moat benefits from regulations, economies of scale, and route density.

It is nearly impossible to open a landfill due to regulations and many smaller landfills shut down because they were unable to afford new environmental standards. In 1980, ~10,000 landfills existed, compared to 1,500 today. WM owns 268 landfills, ~45% more than the next competitor.

Waste Management is also the largest waste collection company. They have economies of scale in terms of customers and revenue. They have nearly twice the amount of revenue as RSG and three times as much as WCN.

Economies of scale and owning the most landfills enables Waste Management to have industry-leading route density. They’re more likely to have a shorter distance from their collection site to the transfer station to the landfill giving them cost advantages.

These advantages allow Waste Management to have superior ROIC over its competitors. These advantages are nearly impossible to replicate and Waste Management should continue to have ROIC above their cost of capital in the future.

I would like to hear others thoughts on $WM and the waste management industry!