Unusual Call Buy in Hazardous Waste Specialist Clean Harbors (CLH)
Clean Harbor (CLH) strong setup for the small-cap with shares forming a multi-month base under its 200-MA and on 3/2 saw a rare buyer of 1000 April $100 calls up to $4. CLH has little other notable open interest. Shares are moving above March value and clearing the 8-, 21- and 55-EMA this week with room out of this small range to $110 and the November range. The broader weekly falling wedge is an explosive setup and can make a big push above the prior highs out to $140. The $5B company trades 21.4X earnings, 1.33X sales, and 9.5X cash. CLH provides environmental and industrial services including collecting and disposing hazardous and non-hazardous waste. They area leader in collecting and recycling used oil, as well, with wide regulatory approval that gives them a strong moat. CLH bought HydroChem PSC for $1.25B in 2021, a deal that greatly expanded their industrial and field services offerings while adding new cross-sell opportunities. The deal was a major tailwind to Q4 performance, too, with revenue up 36% Y/Y with a greater range of services, higher demand, and better pricing power. CLH has a massive opportunity with Hazardous Waste an $11B market, Industrial Services a $14B market, and Lubricants a $15B market. All three are being driven higher by industrial growth, more stringent regulations and demand for turnarounds. Analysts have an average target for shares of $116 with a Street High $125. Raymond James upgraded shares to Strong Buy on 1/10. The firm sees catalysts in 2022 including a record backlog, benefits from Clean Harbors’ recent Hydrochem acquisition with limited synergies baked-in, and the feathering in of the recently announced 3M (MMM) contract that represents the single largest contract win in the company’s history. Short interest is 3.5%. Hedge fund ownership fell 11%.