The Next Gold Rush: Investing in Garbage

Garbage has suddenly become a hot commodity. Just as record oil prices have made it profitable to squeeze oil out of the sand in Canada, it has become profitable to scavenge the landfills for valuable pieces of metal and plastic. According to Roben Farzad's BusinessWeek article "Cash for Trash,", 8 percent of global oil production is used to make plastic each year and it requires 80 percent less energy to produce recycled plastic. A manager of a recycling facility in Auburn, Mass. is getting $900 per bale for aluminum and $300 for No.2 clear plastic. Farzad also interviewed a homeless person who was being offered 7 cents for bottles (up from the traditional 5 cents) and an e-waste plant manager who revealed that a 16 square foot box of memory sticks contains $15,000 in precious metals.

With high global demand for commodities and increased public support for the green movement, the recycling industry looks promising. One of the problems in the past was low commodity prices in the mid '80s and early '90s that made recycling programs unprofitable. Now, with most analysts predicting that the prices of commodities such as oil will continue to rise, this shouldn't be a problem. There is tremendous opportunity for growth in a lot of communities that don't even have a recycling program at all. The recycling plants can't get enough garbage and governments can't find enough places to put their garbage. "Balance the equation, and recycling could grow by orders of magnitude," Farzad wrote. One of the obstacles is the fragmentation of the policies and practices of garbage collection which is often regulated by local governments and varies across the U.S. For instance, my hometown doesn't have a formal recycling program, yet in a nearby city, individuals who are caught with significant recyclables in their garbage can be slapped with fines.

If you are ready to jump on the bandwagon, there are several emerging recycling companies you can look into. TechTurn is an e-recycler that booked $40 million in sales last year and is rushing to open new plants all over the country. Coskata is a startup that attracted venture capitalists with technology that promises to derive $1-a-gallon ethanol from trash. Strategic Materials is the largest pure-play glass recycler and is on pace for $200 million in sales this year. Analyst Eric Prouty's six-stock Buy list of recyclers has returned 180 percent since its inception in 2006, according to BusinessWeek. Investing in "waste and recycling" reached a record $622 milllion in 2007, up from $20 million in 2001. Who would have thought that the stuff we throw away was worth so much? It certainly gives a whole new meaning to the saying "one person's trash is another person's treasure."