We’re Picking Up More Shares of This Holding
We continue to favor the inelastic business model for the core residential business while the Healthcare Solutions unit benefits from the aging-of-the-population tailwind.
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| Symbol | Transaction Type | # Shares Traded | Recent Price $ | Shares Owned After Trade | % Portfolio |
|---|---|---|---|---|---|
| WM | Buy | 83 | 225.22 | 878 | 3.1 |
After you receive this alert, the Pro Portfolio will buy 83 shares of Waste Management (WM) at or near $226.50. Following the trade, we will own 878 WM shares, accounting for roughly 3.15% of the Pro Portfolio’s assets.
This morning’s WM buy follows the discussion we had last week that laid out conditions that would lead us to pick up additional shares for the Portfolio. We will go one step further, and upgrade WM to a One rating given the potential upside to our $265 price target as well as an improving technical setup. We continue to favor the inelastic business model for the core residential waste business while the Healthcare Solutions business benefits from the aging of the population tailwind.
Our play with WM shares is to benefit from the improving margin profile at the company. That profile is being driven by selectivity and focus on the core residential waste business, and further margin gains at the Healthcare Solutions business.
When WM reported its Q2 2026 results, management reaffirmed its 2027 adjusted operating EBITDA target between $8.15 billion and $8.25 billion versus the $3.9 billion achieved in the first two quarters of this year. That implies around 9% adjusted EBIDTA growth between the first and second half compared to ~4%, topping growth over the same time frame.
The company targets its free cash flow between $3.75 billion and $3.85 billion. Here’s the thing: With more than 70% of its free cash flow target for the year already in hand, we would not be surprised to see those higher margins lead to a step-up in free cash flow expectations for H2 2026.
Given the expected free cash flow growth and WM’s comment about the Healthcare Solutions business now being fully integrated, our thinking is the management team is likely to renew its focus on nip-and-tuck M&A transactions. While WM is the largest waste company in North America, roughly half the market is served by small- to mid-sized competitors. That gives the company ample room for management to further consolidate a fragmented waste industry and use its playbook to wring costs out of those acquired businesses.
Over time that points to rising EPS and cash flow levels that can be used to fund other acquisitions, buybacks or dividends. As we see it, the Waste Management story is one worth sticking with, especially if margin expansion prospects and the ones for free cash flow are growing faster than the company’s top line.
A few other thoughts on today’s move. At the margins, it will increase the Portfolio’s exposure to lower beta holdings as well as increase, also at the margins, its dividend income stream.
As we make these moves with WM, we will reset our checkpoint level to $210 from $200.
More Pro Portfolio:
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(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade’s executed price here. Be sure to toggle the chart to sort by Purchase Date.)
At the time of publication, TheStreet Pro Portfolio was long WM.
