So based on what they do, it it evident that they operate in a stable industry. That alone makes me love them in this type of market. But just to drive the point home here are a few more reasons as to why Stericycle could be your ultimate hedge in your portfolio to the recession.

Strong Growth Potential

There is safe growth within a necessary product based when looking at Stericycle;s business.  However, Stericycle is also beginning to penetrate in to emerging markets. This is perfect because while the emerging markets are currently down, Stericycle is taking advantage of the situation and is poising themselves for immense growth potential. Stericycle also has an initiative called Steri-Safe, which provides low-cost, high quality products and services for poorly financed companies. Along with this initiative, they also maintain a diverse customer base. Their largest customer accounts for less than 2% of revenues. They have also proven themselves to be great integrators, successfully completing 140 acquisitions since 1993. Their acquisition pipeline is also expanding. Currently, European valuations are much more attractive than domestic ones, and Stericycle is looking to take advantage of this going forward. There is still potential with the way the economy is deteriorating, and domestic companies will become available at fire sale prices.  This could set Stericycle up for a huge value-added event in the near future.

Favorable Medical Trends

When you operate in a highly regulated industry, their tends to be some advantages within niches of the industry. In the case of Stericycle, the main advantage is the safe demand of the industry since it is a necessity. One of the current trends that I see continuing into the future is the high demand for their services. This demand allows Stericycle to maintain strong pricing power. Now you may be wondering why other companies are not trying to penetrate into this industry. Becuase the industry is very highly regulated, it is very hard and expensive to get this type of business going. Stericycle alone is regulated by the EPA, DEA, FDA, OSHA and DOT. Thus I feel that Stericycle will be able to maintain strong volumes and the competition will stay limited.

Summary

While Industrials is a very touchy sector right now, this opportunity could be your ultimate play within the sector. They operate in a recession proof industry and they have clearly proven that they know how to grow their business. Along with that, government regulation keeps potential competitors out and allows Stericycle to maintain their pricing power. So if you are looking to position yourself as the economy continues to spiral downwards, the I highly recommend you do it through investing in Stericycle!

-Mahir Desai

Disclosure: The mutual fund that the author manages is long SRCL.