Services was recently acquired by Waste Management (NYSE: WM) for $33.15 per
share. This is important because it shows how economies of scale are the key in
the waste management business and consequently that bigger players will look
for scale and growth through consolidating smaller players.
Advanced Disposal stock price
This has two
benefits for investors; one is the growth that the large players will create
while the other is the benefit you immediately receive when the business you
own is take over at a 30% or higher premium to current stock prices.
ADSW was purchased for $33.1 in cash while investors expecting a 10% investment return from ADSW’s business, should not had paid more than $20 per share, including the value of the assets. So, to fully take advantage of investing in the sector, you want to buy when the actual business is delivering a satisfactory yield, be it 10% or 15% if you are like me, and then sell when the market decides to pay full value, where a 5% return is satisfactory for companies like Waste Management. Sounds strange? Well, if you can borrow at 4% and get a 5% return on your investment, you get rich quickly, plus if there are synergies even faster.