Fish said that labor inflation is among their biggest challenges at the moment. His company saw 9% wage inflation last quarter, on top of an even bigger number in the preceding quarter. Waste Management is investing heavily into automation and technology to help reduce their labor dependence. They are replacing rear-loading trucks with automated side-loading vehicles and investing in optical sorting machines at their facilities to help sort recyclables.
Fish said Waste Management doesn't get enough credit for their environmental efforts. Nearly 70% of their vehicles now run on natural gas, Fish explained, and since many of their landfills now generate natural gas, those trucks can refuel after they drop off their loads.
Waste Management also generates a lot of free cash flow, and the company is committed to returning that cash to shareholders with dividends and share buybacks.
Let's check on the charts of WM. In our review of October 20 we wrote that "WM has been in a sustained uptrend and now we can point to the $195 area as the next price target. Traders could go long on a one-day dip risking to $153. The $195 area is our price target." Traders should have been stopped out last month when prices declined to $153.
In this updated daily bar chart of WM, below, we can see that prices have declined below the 200-day moving average line and recent short-term bounces have failed at the underside of this line. Trading volume has increased in recent days telling me that traders are voting with their feet.
The On-Balance-Volume (OBV) line has turned lower telling me that sellers of WM are more aggressive now. The Moving Average Convergence Divergence (MACD) oscillator is bearish and narrowing.
In this weekly Japanese candlestick chart of WM, below, we can see two weekly closes below the 40-week moving average line. There are two lower shadows visible but this may not be enough to steady the picture. The OBV line and the MACD oscillator are pointed down.
In this daily Point and Figure chart of WM, below, we can see a potential downside price target in the $122 area.
Bottom line strategy: Shares of WM are pointed lower and traders should avoid the long side.