Whenever an insider buys $42-million worth of stock, it gets my attention.

Well, such was the case [two weeks ago] when Cascade Investment purchased 1.4 million shares of Republic Services, Inc. (RSG) for between $36.58 and $36.80.

Allow me to be perfectly honest…

Republic Services isn’t a particularly exciting business.

[ad#Google Adsense 336×280-IA]It’s not sitting on a treasure trove of patents.

It’s not on the verge of curing cancer.

And it’s definitely not unleashing a technology that’ll change the world.

So what’s the storyline here?

The storyline is the suitor.

You see, Cascade Investment is actually a “holding company” upon which the richest man in the world likes to place his investment bets.

As it turns out, buying 1.4 million shares of Republic Services wasn’t this demigod’s only move. He also said “Sayonara” to another company, and dumped his entire stake in the firm.

Time to Mirror This Billionaire’s Move?

Bill Gates oversees an $81.7-billion fortune, which is almost $14 billion more than Mexico’s Carlos Slim, the world’s second-richest person.

Very quietly, with little fanfare, Gates has diversified well beyond his Microsoft (MSFT) fortune. In fact, these days, Microsoft only comprises one-fifth of Gates’ holdings.

A large remainder of his wealth is tied up in an investment holding company called Cascade Investment, which is headquartered in Kirkland, Washington, a stone’s throw from Microsoft’s Bellevue headquarters.

[Two weeks ago], Gates bet big on the second-largest provider of non-hazardous solid waste management services in the United States, Republic Services. (The prior week, he liquidated his entire stake in British security firm, GS4 plc (GFS.L).)

Republic Services operates in 39 states – through its 199 transfer stations, 190 active solid waste landfills, 64 recycling centers, and 69 landfill gas and renewable energy projects.

Gates’ $42-million purchase now brings his total holdings in Republic Services to over 91 million shares, making him far and away the company’s largest shareholder.

Other shareholders include fellow billionaires Mario Gabelli and D.E. Shaw.

Why is Gates so bullish?

Well, according to the Environmental Protection Agency, only 54% of total municipal solid waste ends up in landfills. So there’s plenty of room for the industry to grow.

Plus, Republic Services is an attractive backdoor play on the mushrooming recyclables market. As it stands, only $100 million of the company’s $2 billion in sales are derived from this lucrative segment.

When you consider the company’s P/E of 22, versus Waste Management’s (WM) 131, it’s difficult to make a bearish case.

Every segment of Republic Services’ business is showing growth, too.

Most importantly, though, for the first quarter of 2014, earnings grew to $0.37 per diluted share – compared to $0.34 per diluted share for the same period in 2013.

Share price always follows earnings (no exceptions).

So let’s follow Gates’ lead, and buy on any dips.

Onward and Upward,

Robert Williams


Source: Wall Street Daily