On April 22nd, the U.S. Energy Departmentannounced that it will spend $6 billion to clean up nuclear weapons facilities dating back to the Cold-War era. This endeavor is part of Barrack Obama’s stimulus package, and more than half of the money is going toward clean up in South Carolina and Washington. In total, twelve states will receive funding to clean up nuclear and other hazardous waste left behind from the Cold War. This plan has the potential to be a lucrative opportunity for investors as there are only a handful of companies who specialize in hazardous waste clean up. These companies include American Ecology (ECOL), Clean Harbors (CLH), and Perma-Fix Environmental Services (PESI).
American Ecology (ECOL) provides radioactive, hazardous, and industrial waste management services in the United States. It serves both commercial and government entities such as chemical production plants, refineries, steel mills, and medical and academic institutions. What makes American Ecology one of the best ways to play the Cold War weapons clean up is that fact that the company is based in Idaho. Idaho is receiving $468 million to clean up hazardous waste, which is one of the highest payouts to any state, and most of that business should go to American Ecology. Also, other western states such as California, New Mexico, Nevada, and Washington are receiving large amounts of stimulus to clean up their nuclear facilities. Fundamentally, this company offers investors a nice 4.4% dividend yield and is cheap on an earnings-growth basis as the company is expected to grow at 20% over the next fives years. American Ecology is just $3 off its 52-week low of $13.56 and well off its 52-week high of $33.83, making this a great opportunity to get in this stock while it is low.
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Clean Harbors (CLH) provides environmental services in North America, and operates in two segments, Technical Services and Site Services. The company’s Technical Services segment collects, transports, treats, and disposes of hazardous and non-hazardous waste for commercial and industrial companies. The Site Services segment provides services to maintain facilities and clean up hazardous waste materials. This includes site decontamination, demolition, spill clean up, and tank cleaning. The wide range of services offered by Clean Harbors is what makes this company a very attractive play on the hazardous waste clean up plan. While part of the plan calls for the removal and clean up of hazardous waste, another part calls for the demolition of antiquated facilities which is a service Clean Harbors offers. The company’s location in the northeast makes it the logical choice to receive the contracts to clean up the nuclear facilities in New York and Ohio; states that received a combined $286 million in stimulus to clean up their Cold War facilities.
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Perma-Fix Environmental Services (PESI) is a small, speculative company that provides environmental consulting, and technology know-how services in the United States. The company operates in three segments, Nuclear Waste Management Services, Consulting Engineering Services, and Industrial Waste Management Services. Combined, these segments offer nuclear waste storage, disposal of low-level hazardous waste, engineering consulting services, and air, soil, and water waste clean up. Perma-Fix Environmental Services is positioned well to take advantage of the funding being provided to states to clean up their nuclear facilities because of the depth of services they provide. Also, the company is based in Atlanta, Georgia making it the prime candidate to handle the nuclear clean up in southern states like Tennessee, South Carolina, and Kentucky, which received a combined $2.43 billion in stimulus to clean up nuclear waste. Lastly, the company recently announced that they received authorization to commercially store and dispose of radioactive PCB’s at their Kingston, TN facility which will likely play a big role in the clean up of the Oak Ridge National Laboratory facility in Oak Ridge, TN.
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Investors considering investing in the Cold War cleanup might consider a covered call investing strategy as a method for generating monthly income. Covered call investing positions for ECOL and CLH for June 2009, currently have potential returns in the neighborhood of 4.2%. Best of all the 4.2% return is expected to be realized in only 43 days. Investors a little queasy about the stock market might consider portfolio insurance with stock options. A put option acts just like auto and home insurance, if a catastrophe occurs the investment is protected. Investors might also consider combining a protective strategy, like married put strategy, with an income generating strategy like covered call investing. This method provides capital preservation and monthly income. There are many stock trading systems which can be implemented with stock options along with different market sentiments which can be taken advantage of, bullish, bearish and neutral.
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[tags] Energy Department, nuclear weapons, Barrack Obama, South Carolina, Washington, Cold War, radioactive, hazardous, chemical, Idaho, New York, Ohio, Atlanta, Georgia, Tennessee, South Carolina, Kentucky, Kingston, Oak Ridge National Laboratory, Oak Ridge [/tags]