Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Markets Failing to Give Another AI Mega-trend Buying Opportunity - 6th Jun 20
Is the Stock Bulls' Cup Half-Full or Half-Empty? - 6th Jun 20
Is America Headed for a Post-Apocalyptic Currency Collapse? - 6th Jun 20
Potential Highs and Lows For Gold In 2020 - 5th Jun 20
Tying Gold Miners and USD Signals for What Comes Next - 5th Jun 20
Rigged Markets - Central Bank Hypnosis - 5th Jun 20
Gold’s role in the Greater Depression of 2020 - 5th Jun 20
UK Coronavirus Catastrophe Trend Analysis Video - 5th Jun 20
Why Land Rover Discovery Sport SAT NAV is Crap, Use Google Maps Instead - 5th Jun 20
Stock Market Election Year Cycles – What to Expect? - 4th Jun 20
Why Solar Stocks Are Rallying Against All Odds - 4th Jun 20
East Asia Will Be a Post-Pandemic Success - 4th Jun 20
Comparing Bitcoin to Other Market Sectors – Risk vs. Value - 4th Jun 20
Covid, Debt and Precious Metals - 3rd Jun 20
Gold-Silver Ratio And Correlation - 3rd Jun 20
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Investing in Water Stocks: Three Names to Buy Right Now

Companies / Water Sector Mar 27, 2012 - 07:09 AM GMT

By: Money_Morning

Companies

Best Financial Markets Analysis ArticlePatrick Vail writes: You've no doubt heard about the building scarcity of water. It's the reason savvy shareholders have been busy investing in water stocks.

Here's why.

Water may be everywhere but only 3% of it is fresh or suitable for drinking. Two-thirds of that is locked in glaciers and polar icecaps, which means less than 1% of the world's fresh water is available for human use.


That's the water found in lakes, rivers, reservoirs, and underground sources shallow enough to be accessed cheaply. Even still, much of that is polluted or otherwise unsuitable for consumption.

The water that's left is then used in agriculture and industry, and here's the kicker: It is divided between seven billion people... and demand is increasing all the time.

According to the United Nations, in the last century water use has increased at more than twice the rate of population growth.

Water has become so critical that Willem Buiter, chief economist at Citigroup, believes it will soon become "the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals."

That may be hard to imagine, considering we can simply turn on the tap and get fresh water for next to nothing.

But it's true. There are myriad of factors-from population growth to climate change-putting a strain on the world's water supply and causing demand to spike.

We'll look at those factors and how investors can benefit from this growing demand by investing in water stocks.

Investing in Water Stocks: Profit From Rising Demand
The biggest factor in the increasing scarcity of water is agriculture.

In 2012, American farmers will plant more crops than in any year since World War II. After two years of declining yields, this is good news for the agriculture industry, which is seeing commodity prices rise right along with global demand.

Around the world, the picture is much the same. China and India, too, are planting more this season.

The gigantic thirst for agricultural commodities this year means it will also be a huge year for water usage.

According to a study conducted by the University of Twente in the Netherlands, agricultural uses account for 92% of the global water footprint, a broad measurement that aims to quantify global water use and consumption.

What's more, fresh water pollution from agriculture is a worldwide problem that causes billions of dollars in damage. In developing countries, where fewer environmental regulations exist to protect the water supply, nitrate and phosphate levels are expected to rise steadily over the next few decades.

That will put further strain on the water supply - right in the places where demand for water is expected to increase the most. That means emerging markets.

That's because on average, each person in the U.S. uses 100 to 150 gallons of water every day, according to the Environmental Protection Agency. But in places like China and India, the average is closer to 20 gallons per day.

In fact, China and India already have the two largest water footprints of any country on the planet. And they're about to get even bigger as their consumption of commodities skyrockets - water included.

The surging demand for water in these emerging markets is going to require better "water solutions," or innovative ways of filtering and treating water to make it drinkable.

Better infrastructure to deliver fresh, clean drinking water to billions of new middle class citizens is also going to be needed, including filters, pumps, pipelines, and new processing plants.

That makes the growth in water stocks inevitable as billions of dollars is spent to meet demand.

Given the scarcity, the sums are tremendous.

According to the Organisation for Economic Cooperation and Development (OECD), global investment in water supply infrastructure needs to increase by nearly $500 billion by 2025.

While some of that money will go to fixing aged infrastructure in the West, much of it is going to be needed to manage increased demand in emerging markets like Asia, Latin America, and Africa.

Three Ways to Invest in Water Stocks
A great way to gain exposure to water stocks is to buy companies that deliver it.

Water utilities have provided a great defensive position for the past few years, but their value is going to rise in tandem with demand for water. (Keep in mind that some companies operate in a regulated environment, which usually means there's a cap on how much a utility can charge for delivery.)

One quality company is Brazilian utility Companhia de Saneamento Basico do Estado de Sao Paulo (NYSE ADR: SBS).

SBS provides water and sewage services to nearly 24 million people in the state of Sao Paolo. The company has a market cap of over $8.6 billion, a very attractive P/E of 11.86, and a nice yield of just over 4%.

SBS has been on a tear since the start of 2012. Its share price has spiked 34% to $75.74. Given SBS is located in one of the world's best markets for growth, its excellent financials, and, of course, rising demand for water, the company can go higher still.

Another way to invest in water is through companies that create solutions to the problems of tapping, pumping, filtering, and delivering water to millions.

Pentair Inc. (NYSE: PNR) is a global water solutions company that manufactures water pumps, irrigation and crop spray equipment, marine pumps and accessories, filtration, softener, and deionization products and systems, and mid-to-large fluid management products and applications.

Basically, PNR is solving the problem of delivering drinkable water to customers around the world.

PNR's revenue grew by 14.83% during the most recent quarter, from $753.86 million to $865.69 million. And the company's expanding in the right places, with revenues in Latin America and China jumping 18% and 26%, respectively in 2010. With the coming growth in developing economies, PNR could go sky high.

Perhaps the easiest way to invest in water stocks is through the PowerShares Global Water Fund (PIO).

It's an exchange-traded fund that uses the Nasdaq OMX Global Water Index as a benchmark to track companies creating products designed to conserve and purify water for homes, businesses, and industries.

The fund invests in an array of stocks, including utilities and other management and delivery companies, equipment manufacturers, and solutions companies, so PIO is diverse. Sixty-five percent of the fund is invested outside the United States, in places where we know growth is healthy, like Singapore and Brazil.

Either way, you don't realize the wealth of the water until it's gone. Investing in water stocks is going to be one of the market's great long-term trends.

[Editor's Note: Chief Investment Strategist Keith Fitz-Gerald actually recommended Pentair Inc. to subscribers of our premium service Private Briefing back in early September.

The stock has already risen 18% since then -- with more to come, as this report shows.

If you'd like to receive those early recommendations from our experts - and in the process receive $26,000 worth of our best trading-service advice for just $5 - check out Private Briefing by clicking here.]

Source :http://moneymorning.com/2012/03/27/forget-goldman-sachs-only-fools-rush-in/

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules