This Green Stock May Clean Up

Going green has become the battle cry of the year. It's not anything new, it's simply that with the need for renewable energy sources and reducing consumption, it seems everyone is actually getting on board this time. The "greens" have been around for a while, and there have been a few companies that have made it their business, long before the recent outcry, to clean up the environment. Reducing pollution, cleaning up contaminated sites and putting in place operations to prevent further contamination continues to be a necessity.

What better place to start then with Clean Harbors (CLHB - commentary - Cramer's Take) in this regard. This company, founded in 1980, is the top player in the field and has been thinking green for some time.

In terms of sales and breadth of operations, Clean Harbor is North America's leading provider of environmental and hazardous waste management services. Most of its rivals went bankrupt or consolidated during the 1990s when the industry went through some rough weather, so to speak.

Clean Harbor acquired its biggest competitor, Safety Kleen's Chemical Services unit, in 2002. The firm already had a very strong business in site services (i.e. contaminated sites clean up, emergency response and maintenance services), and by adding the Chemical Services unit Clean Harbors gained a significant amount of waste disposal facilities (incinerators and landfills). Clean Harbor has 51 waste management facilities, including nine landfills, six incineration locales, six wastewater treatment centers and two solvent recovery facilities.

The Norwell, Mass.-based firm is doing well because it serves customers in industries that are resistant to the weak economy, including oil and drug companies, the U.S. Coast Guard and the Department of Homeland Security. Refineries, drug and chemical companies provide the strongest amount of business. That sounds good to us, especially with all the drilling and outcry to open up more areas for drilling. Keeping those sites environmentally friendly will be a major priority moving forward to keep public opinion positive.

Many of the company's customers own incinerators; however, because of rising energy costs, the operating cost of incinerators has also gone up. This has caused many owners to shutdown their incinerators and outsource their waste disposal to third parties, like Clean Harbors. Due to extreme barriers in the hazardous waste and incineration business, there has not been a new incineration facility built in over 15 years, putting Clean Harbors in an opportunistic position.

Clean Harbors

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The technical configuration looks like most energy and basic material stocks at this point. Clean Harbors stock is in a strong uptrend and has been trending higher for most of 2008, no small accomplishment. It is currently forming a consolidation after another push to new highs. This is normal corrective price activity and should continue in coming weeks.

These periodic consolidations are healthy and allow the stock to maintain its upward momentum without exhausting the buying pressure. The consolidations also allow for an opportunity to establish long positions. We would look to use pullbacks to the $70 level as an opportunity to get long CLHB. A protective stop in the $66-$67 area could be used as a stop against those positions.

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At the time of publication, John Hughes and Scott Maragioglio had no positions in the stocks mentioned. Hughes and Maragioglio co-founded Epiphany Equity Research, which has developed and utilizes proprietary tools to identify and track liquidity changes in the market indices and sectors. Hughes advises numerous asset managers, hedge funds and institutions managing in excess of $30 billion. Maragioglio is a member of the market technicians association (MTA) as well as The American Association of Professional Technical Analysts (AAPTA) and holds a Chartered Market Technician (CMT) designation. Maragioglio has also served on the board of directors of the AAPTA.