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Water Stocks

The Dynamic Wealth Report
November 12, 2008

Warning - Is Your Drinking Water Contaminated?
by Brian T Mikes, Managing Editor

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.


Commodity Watch 

• 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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Issue Date:
 Wednesday, November 12, 2008


Notable Highs and Lows

•  American Express (AXP) hit a new 52-week low of just over $22.  The company announced they’d become a bank holding company.  Their market cap is just under $25 billion.

•  Navistar (NAV) hit a new 52-week low of just over $20.  The company announced they’d reorganize their truck business.  They now have a market cap of $1.4 billion.

•  Freeport McMoRan (FCX) is trading near its 52-week low of just over $22. The mining company is trading lower on falling commodity prices.  Their market cap is now just over $8.7 billion.


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Best Performing Sectors

Sector Gain
Water 25%
Exploration & Production 22%
Oil & Gas 17%
Waste Disposal 16%
Fixed Line Telecom 15%
*Last 30 days

Worst Performing Sectors


Sector Loss
Precious Metals   53%
Tires 47%
Automobiles 28%
Recreation Products 28%
Forestry 26%
*Last 30 days


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