MR MONEY MAKER: Investors can clean up with Biffa

MR MONEY MAKER: Investors can clean up from war on waste with Biffa

What’s happening? 

We have all seen those appalling pictures of piles of waste around the globe, and those almost invisible rivers in Indonesia which seem to be totally clogged with plastic. 

In a consumer-led economy we have all been trained to buy ‘stuff’, as can been seen by the dependence of many economies, especially the US and the UK, on consumer products and services. 

After all, the likes of Mr and Mrs Joe Shmo, who live in Little Rock, Arkansas and shop in Walmart, account for over 65 per cent of the American economy. 

Cleaning up: Biffa has been a leader in the UK’s waste industry for over 100 years

However, with ‘stuff’ comes packaging of all types and although we are all highly-honed purchasers, we are mostly incredibly bad at managing our waste. 

Why Does It Matter? 

I am sure you are all very tired of hearing about ESG (environmental, social and governance), which is now the investment mantra in the markets. All companies will have to affirm publicly their sworn adherence to this new dogma. 

However, no matter what level of cynicism you may have, managing our waste is important. If, then, we want to find a way of supporting, investing in and even benefiting from this area, then a great waste management business is what we want. 

And I am pleased to tell you that we have one in the UK: its name, rather wonderfully, is Biffa. 

What Should I Do? 

The problem with writing about companies is often timing. I would have loved to have told you about Biffa a year ago, when the share price was considerably lower, because it has risen strongly since its nadir in April 2020. 

But the fact that the price has moved already is no reason to avoid it. The company should be seen as a longer-term investment and not a punt. 

It is a sector that will always be controversial, with questions over quality of service and compliance with changing environmental standards. Actually, this we can use to our advantage, as it will be reflected in the volatility of the share price. So if you are willing to be patient, then you can wait until a dip occurs and buy then.

Any Suggestions?

Biffa has been a leader in the UK’s waste industry for over 100 years. Its operations cover the entire breadth of the waste management process including collection, reuse, recycling, treatment, disposal and energy generation. 

What I particularly like is one of their statements of intent and that is ‘to change the way people think about waste’. That in my view is going to be vital. 

However, if the risk of a single stock is just a little too much, then a passive fund covering the same sector is a very cost-effective alternative. My suggestion would be the iSTOXX Global Responsible Waste Management Select 30 Index – which targets companies that are the best at dealing with what is called in jargon their ‘waste footprint’. 

Justin Urquhart Stewart co-founded fund manager 7IM and is chairman of investment platform Regionally.