Water Stocks
The Dynamic Wealth Report
November 12, 2008
Warning - Is Your Drinking Water Contaminated?
Over the last few months the world’s been focused on the global credit
crisis. You couldn’t walk 10 feet without seeing a new headline about
the crisis, or hearing someone discussing the problems we’re all facing.
From one crisis to the next.
Before we had the financial crisis, we were all concerned about the
global energy crisis. This summer we all watched oil spike to over $140
a barrel. Now oil’s trading for less than $60 a barrel. Gasoline prices
matched the march up, and the plummet down. I can’t think of another
time when Americans so closely watched the movements of the commodity
markets.
It seemed everyone knew about the correlation between high oil and high
gas prices. It had a direct impact on their wallets.
With several crises behind us, many are thinking about what’s next. As
important as oil is right now, I think the next crisis will be over a
very different liquid – Water.
It’s one item everyone needs to survive. Pure, Clean, Drinkable . . .
Water.
I’ve got no doubt that in the coming years we’ll see a water crisis in
parts of the globe. Between now and then, I see some great ways to
profit from the increasing demands for water . . . but I’ll get to those
in a minute.
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First, some interesting facts.
I’m sure you’ve all heard the well known fact - two-thirds of the earth
is covered with water. Some estimates put the total amount of this
resource at 326 trillion gallons. It sounds like a lot till you realize
only 2% of that water is drinkable.
But wait, there’s more. Most of the drinkable water is contained in
polar ice caps and glaciers. It leaves mankind less than 0.4% of
drinkable water. Now this isn’t a problem for many people. Almost 20% of
the world’s drinkable water is found in the Great Lakes. Lake Baikal in
Russia holds another 20%.
Now you see the problem . . .
It seems like lots of water’s available, but it’s not distributed evenly
around the globe. Americans are clearly water hogs. We consume an
average of 127,400 gallons per person every year. Yet, more than 30% of
the world’s population lives and works in water stressed areas.
Enough with the facts. Where does that leave us?
Water is clearly an important commodity. Companies who acquire water
rights, manage water supply, or develop purification technologies will
be hugely successful in the coming decades. The demand for clean water
isn’t going to go away.
I know of a number of companies active in the water industry. Probably
the biggest is General Electric (GE). I know it sounds strange, but one
of their major divisions is focused on water purification technologies.
I think GE’s a little too big to give us good exposure to the water
industry. Instead, I like three other companies. American States Water
(AWR), American Water (AWK), and Aqua America (WTR). They’re all focused
on providing clean drinkable water to residential and commercial
customers. All of them are growing and profitable.
If you’re looking for a way to capitalize on the next great crisis, take
a look at the water industry.
• Copper ($1.62 per pound)
Copper has fallen significantly from its record high set back just a few
months ago. We’re trading at levels last seen in 2005. It’s so bad,
Freeport McMoRan’s (FCX) started slowing development of several mining
properties.
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