Sims Group Limited (SMS)

Recycling and going green is the new fad. And people like profiting off it

a number of ways the current political climate could benefit this company. of course, steel could tank and the political climate would be trumped by that. but, what the heck, it's CAPS.

SMS's earnings have been slaughtered by the recession, but as global economic growth returns, the demand for metals with a low carbon footprint - a commodity in which SMS is a global leader - will grow even faster than the demand for metals in general. When SMS returns to pre-recession earnings of $2.50+ within a year or three (current hard-to-find estimates are for ~$1 by June 2011), its SP should ramp up into the $40s, $50s and beyond.

Core holding in Royce Low Price Stock fund, that has done well, but off its out performance of the S&P

Oops, missed this one. There is little not to like here. The cheapest way to get ore out of the ground is not let it back in. With Government encouraging/paying people to junk their cars their should be a nice cheap supply of raw materials. You can only keep an old car for so long. They continue to buy their competition, MMI recently, Fairless this morning. The debt is manageable. I may lose points in the next few months as the slow down continues and China stops buying but long term this will do fine.

Metals supplier with a natural hedge against weak dollar and significant exposure to China infrastructure spending.

Largest metals recycling company with global presence. Down with the rest of the economy but will come back strong. Good "green" business with smart management.

Well priced compared to industry.

recycling the promising

Low P/E, good EPS, low debt. This thing is at a great price right now.

Cyclical company during this downturn in commodities will have a short term effect on this company. Dienst is an excellent CEO with a passion for the business and will put the business in cost cutting mode in the short term. Long term this company has no short term debt, generates cash, and will acquire more businesses in the future to increase their global footprint. At current valuation even with FCF growth in the future this is a $11.50/share business.

I got invested in SMS from their acquisition of Metal Management. I thought then that Metal Management was a great company in the recycling business and SMS picking up Metal Management for stock seemed like a smart play as it made Sims Group one of the largest recyclers in the world. With finite resources in this world, the reusal of Steel and scrap materials is going to be big business, even if returns are slightly off because of a slowing world economy.

Great company, good price.

Group Value play in recycled steel sector. Continued high commodity prices makes recycled steel an efficient alternative.

I like the business in good times and bad.

Steel demand will remain strong and cheaper methods of getting steel will be a key advantage going forward with energy costs rising.

CAPS is the testing ground for my investment newsletter. I like to pick stocks that will benefit from macro trends.

Here's what I like about this stock -
"Sims operates a geographically diverse metals recycling business with a network of processing facilities, many with deep-water port access, supported by an extensive network of feeder yards from which to source recyclable ferrous and non-ferrous metals. It has positions in the metals recycling markets of Australasia, the east and west coasts of the United States, and the United Kingdom. Sims also has a strategic network of trading offices in Asia. Through its Sims Recycling Solutions business, Sims has an emerging global e-recycling business, with established operations in the United Kingdom, Continental Europe and North America and a developing presence in the Asia Pacific region."

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Picked this in conjunction with my MEA call. With raw materials rising in price, and the growing awareness towards environmental friendly practices, the demand for recycling is not only increasing, but becoming assimilated into how we do business. It's the right call, on the right business, at the right time... right now...

Low scrap inventories, increases in iron prices will benefit SMS.