(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — Bill Gates was doing HALO before it was cool. Through the Bill & Melinda Gates Foundation Trust, he owns about 28.9 million shares of Waste Management (WM) , roughly 7% of the company. That makes the Trust the single largest individual shareholder and one of the top holders overall. Microsoft is a $3 trillion global software platform tied to enterprise spending and AI capex. Waste Management is almost its polar opposite: A collection and landfill operator with contracted revenue, embedded price escalators and assets that cannot be replicated because you're not permitting new landfills in America. Waste Management generates more than $20 billion in annual revenue, over $5 billion in EBITDA and roughly $2 billion in free cash flow. It has increased its dividend for more than 20 consecutive years. Gates didn't spend the last 20 years hedging his tech exposure with another growth stock. He paired the legacy Microsoft position with a heavy-asset, low-obsolescence compounder that throws off cash in any environment. The company has been spending big money on modernizing its equipment and building in automation. This is the year that investment cycle finally pays off. Sean's going to tell you the story and I'll be back with the setup. Best Stock Spotlight: Waste Management, Inc. (WM) Sean — The story I am about to tell is, of course, already priced in. But it's an interesting one nonetheless and allows you to feel a bit better about pulling the buy trigger on a stock within 5% of 52-week highs. The market has been hyper-focused on capital expenditures (capex) and Waste Management has its own capex story to tell. WM essentially went through a multiyear reinvestment cycle where they deliberately sacrificed free cash flow to build out a new, higher-margin business. Their management team described this as the "planting years" referring to farmers planting crops. WM deployed roughly $11.6 billion in "planting" capital across FY2022–FY2025. The largest investment by far was the $7.5 billion acquisition of Stericycle, which created the Healthcare Solutions segment. This segment is focused on medical waste collection, treatment, and disposal and generated $2 billion in revenue within its first full year under WM ownership achieving 16% profit margins. On the organic side, about $1.8 billion went toward infrastructure, including seven landfill gas-to-energy plants now generating pipeline-quality natural gas and $1.2 billion into modernizing the recycling network with robotics and AI across nine recycling facilities. WM also ran an elevated truck purchasing program to accelerate the shift to automated side-loader trucks, representing $420 million in above-average fleet spend, plus an additional $800 million in technology and bolt-on acquisitions in FY2024 alone. Well, all of that "planting" is beginning to pay off. As you can see in the chart above these investments affected cash flow directly, and as the capex spigot shuts, free cash starts to flow. WM's management team has been referring to 2026 as the "year of harvest." Here are some recent quotes: CEO Jim Fish during the Goldman Industrials and Materials Conference in December: "I think certainly in 2026, what you'll hear us do is really harvest a lot of the cash from these and return it to shareholders. $3 billion, both in the RNG business and in the recycling business, has been a substantial investment of dollars." Here's their CFO, David Reed, in their earnings report in January: " As we alluded to in the last quarter and also with our December announcement on some of our shareholder returns, we do view 2026 as a year of harvest and a balanced capital allocation program." All of these projects are now generating returns rather than consuming capital. Capex spend is collapsing from $950 million in FY2024 to $200 million in FY2026. WM expects 29% year over year FCF growth at the midpoint, which would be the largest FCF jump since Covid. Combined with more efficient operations and new revenue streams, WM and its shareholders are primed to harvest cash, just in time for HALO to rerate their earnings. Risk management Josh — I like this one because you have a proof point coming up right now. We're going to watch how the stock behaves as it drops quietly into this rising 50-day moving average. I expect a bit of consolidation allowing time for the 200-day to turn upward sloping. WM is not going to run away from us. Waste Management ripped higher off the November lows, reclaimed both the 50-day and 200-day, and drove straight back into the prior highs in the $238 to $240 area. Since then, price has tightened up just beneath resistance in a shallow consolidation. It's controlled, occurring above rising moving averages, and showing no signs of heavy distribution. The old highs are back in play. A decisive push through 238 to 240 would put the stock into blue-sky territory. Risk is clean and defined. A failure back below the 200-day around 222 would negate the setup and suggest the breakout attempt needs more time. Until proven otherwise, this is constructive digestion under resistance, not distribution. Traders may want to take a half position here and double up on the breakout through $240. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
