Invest in the Gulf Oil Spill Clean Up
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This week brought new developments in the BP oil spill
saga. First, a judge overturned the moratorium on deep-water drilling. Then the
containment cap that had been collecting some of the oil was knocked off (it
has since been replaced).
The U.S. government recently said that 60,000 barrels of
oil could be flowing into the Gulf every day. At that rate, an amount
equivalent to the Exxon Valdez disaster could be spewing into the Gulf every
Several million barrels of oil have spewed into the Gulf
since the spill began in April and tar balls have started washing up on the
shores of Louisiana, Mississippi, Alabama and Florida.
This crisis is clearly far from over and an enormous
clean-up will be required to restore the region. There are many organizations
and companies working on the effort already and one of them, Clean Harbors, was
recently featured in Cabot Green Investor. This is what Editor Brendan Coffey
“Clean Harbors is the market share leader in
hazardous waste services and a leader in overall environmental remediation and
other services. Clean Harbors is a well-run company that was founded by current
CEO Alan Kim in 1980 as a four-man outfit dedicated to cleaning out oil tanks.
Last month, the company sent a phalanx of employees to begin cleanup efforts in
the Gulf. Among its responsibilities are recruiting and training local
residents to assist in the cleanup, providing containment equipment and boats,
equipment and services to remove the oil from the water, and removing and
disposing of the waste in its own incinerators and landfills. In mid-May, Clean
Harbors announced that the effort would boost current quarter revenues by 15%
to 20% over previous estimates of $352 million. Those earnings will be
announced in August.
“Given the scope of the Deepwater Horizon well
disaster and the established reputation of Clean Harbors, we suspect this
effort is only beginning and will benefit the company for months if not years
to come. Even before the disaster, BP was cited as one of Clean Harbors’ loyal
customers and Clean Harbors had worked closely with local governments in recovery
efforts after Hurricane Katrina. While the company operates nationwide, it has
clusters of operations in New Orleans and east Texas that provide a wide base
of nearby expertise to draw on. It also has clusters of facilities in the
northern Atlantic coast from Maryland up through its home base in Massachusetts
to Maine, the Chicago area and southern California, along with extensive
operations throughout Canada.
“Clean Harbors gets 15% of its $1.4 billion annual
revenue from field services, primarily emergency cleanups like the Gulf
disaster. Another 49% comes from technical services, like the carting and
disposal of hazardous waste. Around 32% of sales come from industrial services
such as routine cleaning and maintenance of systems such as oil refinery systems
and emergency power outage services. The remaining 4% comes from exploration
services, such as aerial surveys of land, drill camps and civil water
engineering. Overall, Clean Harbors has over 50,000 customers on its roster,
including a majority of the Fortune 500. Its biggest segment is the chemical
industry (21% of sales), followed by refineries and general manufacturing with
11% of sales each. Segments like healthcare, government, biotechnology and
utilities customers also provide notable business.
“Clean Harbors hasn’t been waiting for disasters to
expand sales-since 2006, the company has spent around $500 million to acquire
six companies and a half interest in a seventh to increase its footprint in
western Canada, California and recycling services nationally. It is now the
largest hazardous waste incinerator operator in North America, and the second
largest owner of landfill volume. The company has been operating a little under
capacity of late because of canceled projects and few emergency projects, but
that looks like it has changed, not just because of the Gulf disaster but also
thanks to the modestly improving U.S. economy.
“Right now, the company looks very likely to
generate 2010 sales close to $1.45 billion, the high end of its revenue guidance
for the year. Wall Street analysts expect $2.65 earnings per share for the year
too, with some projections that sales could go as high as $1.5 billion. Up
until the recent economic crisis, Clean Harbors had been exceptional at meeting
or beating estimates. It had a few missteps since missing consensus the past
five quarters running, but management has been at the helm for many years and
it’s a good bet they will get the company back on track with investors now that
the economy is stabilizing.”
And CLH’s chart looks good as well. Shares began to see
increased buying after the late April break of the BP well. Shares then leapt
$9 a share on huge volume–including its largest trading day ever–after the
company’s official announcement of its Gulf cleanup involvement.
With so much work ahead in the Gulf region, there’s
little doubt that Clean Harbors will be a growing enterprise for years to come.
And once the market sorts itself out, the stock is likely to follow it higher.
If you’d like continuing coverage of CLH and other
high-potential Green stocks, try a subscription to Cabot Green Investor. It’s
the top source for stocks in this growing area and if you subscribe now, you’ll
receive Brendan’s latest Special Report, “5 Stocks Wall Street Visionaries
Are Buying Now.”
In this week’s Stock Market Analysis Video, Cabot China
& Emerging Markets Report Editor Paul Goodwin says it hasn’t been a
decisive week in the market. Stocks discussed include Pioneer Natural Resources
(PXD), VanceInfo Technologies Inc (VIT), Autozone (AZO) and Netflix (NFLX).
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In case you didn’t get a chance to read all the issues of
Cabot Wealth Advisory this week and want to catch up on any investing and stock
tips you might have missed, I have links below to each issue.
Cabot Wealth Advisory 6/21/10 – Worm on Tongue
On Monday, Timothy Lutts wrote about a letter he received
from a reader inquiring about when to be a contrarian and when it pays to be a
part of the crowd. Tim also discussed some interesting six-word memoirs,
including one phrase that’s engraved on Cabot’s mantel: “Markets are never
wrong; opinions are.” Tim finished by discussing a great growth stock.
Featured stock: Isilon Systems (ISLN).
Cabot Wealth Advisory 6/24/10 – In the Market, the Early
Bird Doesn’t Always Get the Worm
On Thursday, Michael Cintolo discussed the Cabot Tides,
one of our proprietary market timing indicators and why investing early doesn’t
necessary reap rewards in the stock market. Mike also talked about the basics
of reading stock charts and a stock that could be the next LED superstar.
Featured Stock: Rubicon Technology (RBCN).
Until next time,
Editor of Cabot Wealth Advisory
P.S. Connect with Cabot on Twitter: http://twitter.com/IconoInvestor