The planet has a problem with “forever” chemicals. Known as PFAS, the chemicals are everywhere—from our nonstick cookware to our waterproof clothes, and smartphones. The chemicals are even in our drinking water and bloodstreams, and have been linked to increased risk of cancer in humans, among other issues.
A growing number of lawsuits and regulatory bans are now striking back at PFAS. For investors, there may be opportunity in the companies that are helping to detect the chemicals and remediate the harm.
“PFAS touches so many sectors,” says Dimple Gosai, clean tech analyst and head of U.S. ESG research at
BofA
Securities. The chemicals are pervasive in consumer apparel and food packaging, she notes, and are having an impact on insurers, industrial companies, and water utilities. “It’s a risk I think everyone needs to care about.”
More than 9,800 lawsuits alleging harm from PFAS have been launched across 140 industries since 1999, leading to $16.7 billion in settlements, according to a recent report from risk consultancy Milliman.
Recent actions to address PFAS include some apparel brands removing them from merchandise. A dozen states have also banned the sale of firefighting foam containing PFAS, short for per- and polyfluoroalkyl compounds.
Contaminated water is a growing concern. According to a 2023 study by the U.S. Geological Survey, at least 45% of tap water is estimated to have one or more types of PFAS. The Environmental Protection Agency is expected to finalize legally enforceable standards for PFAS in drinking water early this year. Ten states have enforceable drinking water standards for some PFAS chemicals while 13 more have adopted guidance levels and health advisories for PFAS in drinking water.
“What that means is that you’re going to have companies like
American Water Works
having to spend a lot of money on upgrading to provide PFAS removal capability,” said Gosai. Overall, she sees the PFAS “remediation opportunity” at $220 billion.
Gosai and her team identified 13 U.S. stocks that are providing PFAS solutions. Five have “Buy” ratings by BofA analysts:
Aecom,
Montrose Environmental Group,
Republic Services,
Waste Connections,
and
Thermo Fisher Scientific.
Infrastructure-consulting firm
Aecom
has developed a technology, De-Fluoro, that breaks down forever chemicals. The technology is designed to break apart the PFAS molecules by combining them with oxygen through an electrical charge.
At its investor day in December, Lara Poloni, Aecom’s president, said “there’s a 5x growth opportunity” with PFAS. The PFAS story is “huge” and “accelerating,” she said. “We’ve led this market with very deep technical expertise for more than 20 years. We’re very well-positioned.”
The stock recently traded at around $89. BofA’s price target is $95.
Montrose Environmental Group
has completed remediation projects at U.S. manufacturing and military sites, according to BofA. The company highlighted PFAS as a growth area with “strengthened tailwinds from new and anticipated regulations” on a recent earnings call. Its stock recently changed hands around $30.60. BofA’s price target is $40.
Waste-management company
Republic Services
last year announced it was partnering with Wurtsmith Air Force Base to help in PFAS remediation. Republic could have some liability to tightened rules or legal actions. But it also sees opportunity: “They should want us to take care of PFAS because we’re the one collecting it,” president Jon Vander Ark said last July. He added there’s “lots of opportunities” on the cleanup side. “We have some solutions today. That portfolio is going to grow. So we think this is a net positive for the business.”
The stock trades around $171. BofA’s price target is $182.
Waste Connections
is a top pick of Barron’s Roundtable member David Giroux, CIO at
T. Rowe Price.
He calls it “the premier waste company in terms of management and asset quality, free cash conversion, pricing power, and acquisition prowess.”
Waste Connections offers hazardous waste treatment and disposal services, including for PFAS, and increased regulation of PFAS and other emerging contaminants could “adversely affect” its operations, the company has said.
Gosai says the company could still benefit from PFAS remediation—despite near-term investment that might be needed to address contamination at some landfills. The opportunity is that the remediation industry could grow as more waste companies start investing in PFAS destruction technologies, she said.
Shares recently traded around $155. BofA has a $165 target on it.
Thermo Fisher Scientific
is the global leader in laboratory equipment, analytical instruments and diagnostics tools used across healthcare and biotech industries. The firm is the market leader in mass spectrometry, an analytical tool for detecting PFAS, according to BofA. As bans and restrictions come into effect and testing ramps up, the company should be well-positioned.
Shares were recently at $555. Thermo Fisher Scientific was a Barron’s stock pick last April, recommending it at $574. BofA sees the stock reaching $600 over the next12 months.
Write to Lauren Foster at [email protected]
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