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The Best Water Stocks

Mass Media Late to the Water Investment Game

Written by Nick Hodge
Posted October 8, 2007 at 8:00AM

Water is starting to do what I've been predicting it would do for quite some time.  Right now, the best water stocks are boiling hot.

There have been myriad announcements in the past few days that illustrate exactly what I'm talking about, but one, in particular, caught my eye.

Investing in Water ETFs

Last Friday, BusinessWeek ran a story entitled "Water ETFs: A Rising Tide."  The subtitle continued, "Limited supply and high demand make industries surrounding water-its supply, management, and exchange-traded funds-attractive opportunities."

Tell me something I haven't been writing about for the past six months.  It felt like I was reading one of my own articles.

The BusinessWeek article hit on the same points that I've been trying to drive home as well:

  • Most people take water for granted
  • Water is a precious commodity
  • There is limited supply and unlimited demand
  • As prices rise, consumption does not decrease and
  • Companies involved in this sector are attractive investment opportunities

All that makes Som Seif, CEO of Claymore Investments, believe that the "fundamentals surrounding the water and water-treatment industry are extremely bullish."  I couldn't agree more.

In the article, Seif backs up his claim entirely with other points that I've made as well:

  • Demand for clean water is growing around the globe
  • Water infrastructure needs vast improvements and
  • Water management is shifting from municipalities to private corporations

And he's entirely right.  In fact, you can read about all of these topics in the free water report I provided to Green Chip Review members.

The only thing I don't agree with is investing in the water boom via exchange traded funds (ETFs).  Seif's ETF for water, the Claymore S&P Global Water ETF, is up a measly 5.2% for the year.

My Green Chip Stocks Water Index is up over 23%, with four positions up over 50%.

It is also interesting to note that the Claymore ETF and my water index only have only one position in common.  That stock is Nalco Holding Co. (NYSE: NLC).  It's up 44% on the year. 

Nalco (NYSE: NLC): One of the World's Best Water Stocks

I guess we've done the same research.  We've just applied what we know differently.

Mergers and Acquisitions in the Water Sector

The BusinessWeek article also jumped on the M&A train, announcing that municipally-owned water utilities aren't getting the funding they need to operate.

This is a topic I've covered in the articles, Investing in Water and The Lurking Water Monster.

And although BusinessWeek was late to the gate on this issue as well, the article did present a little bit of new information, including some promising numbers.

For example, William Brennan, president of Aqua Terra Asset Management, noted that "the annual cost of maintaining the infrastructure of global water systems falls somewhere between $425 billion and $700 billion."

And, fueled by deteriorating pipes, the American Society of Civil Engineers says the U.S. water infrastructure will require more than $1 trillion in repairs by 2025.

Plus, because over 80% of water utilities are municipally-owned, they simply can't keep up with these rising costs.  That makes the atmosphere ripe for M&A dominated by the private sector.

In fact, Aqua America Inc. (NYSE: WTR) announced the closing of two acquisitions this morning.  Aqua America bought a water and sewer company near Chapel Hill, NC and the wastewater system serving a township in Chester County, PA. 

And that's after they announced a December 2007 dividend of $0.125 per share last Friday.  There's simply no downside.

World's Best Water Stocks: Where To Invest

The bottom line here is that investing in water is here to stay, and Green Chip was one of the earliest publications to the game.

In the coming months and years, there will be legendary profits made in this industry.  And some are starting to be made right now.

So, you have a few options. 

You could invest in water-related stocks as the information comes to you from mainstream sources.  But, as you can now see, those sources normally aren't the ones getting the worms. 

Or, you could grab some shares of an industry-associated ETF.  But again, those just lump together companies that are related--either directly or indirectly--to an industry.  The Claymore ETF has a position in Kubota for cryin' out loud!

Then again, you could get with a service that aggregates all available information and recommends stocks individually, with strict buy and sell limits.

If you did that, you'd be with Green Chip Stocks.  To become a member today, click here.

Until next time,

nick hodge



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