Jim Rogers' New Investment for 2013

Where's the Water?


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By Swagato Chakravorty
Wednesday, April 17th, 2013

Jim Rogers showcased his foresight back in 1999 when he sounded the bugle about a rally in commodities. Now, he says water is the next big thing to watch out for.

Bloomberg quotes the man himself:

“If you can find ways to invest in water, you will be extremely rich because we do have a serious water problem in many parts of the world like India, China, the southwestern part of the U.S., and west of the Red Sea,” Rogers, chairman of Rogers Holdings, told reporters at his home in Singapore today [April 15].

Why water, then? We don’t usually think about it here in the U.S. when running a bath or watering the lawn. But water is big business.

water dropThe United Nations Food and Agricultural Organization has already warned that growing demand for food—particularly from developing nations—will lead to a shortage in supplies. In fact, by 2050, water used for agricultural practices will increase between 70 and 90 percent from today’s levels. That’s because the demand for food is expected to double over that period, driven chiefly by skyrocketing needs in developing nations.

We in the U.S. are relatively fortunate that we don’t have to measure out pails of water for daily use, but others aren’t that fortunate. That means opportunity, and that means water is interesting from an investor’s perspective.

In 2012, the S&P Global Water Index (NYSE: CGW) outdid the S&P 500, with a 21 percent gain against the latter’s 16 percent, Yahoo! Finance reports. Meanwhile, PowerShares Water Resources Fund (NYSE: PHO) saw its shares rise 23 percent. PowerShares is the biggest ETF in the water sector.

In the past five years, another company, Connecticut Water Services (NASDAQ: CTWS), has seen its stock rise by 20 percent.

Water: A Necessity Everywhere

Consider the vast amounts of infrastructure and systems that play some part in all the uses we make of water. Excavating it, treating it, purifying it, supplying it, pumping it, storing it—we do a lot with water.

Right now, the biggest problem is that most of this vast water infrastructure is aging. The U.S. Geological Survey has said that the nation loses some 1.7 trillion gallons yearly just due to leaky systems and water main breaks.

Consider that with that water, we could supply the ten biggest cities in the country for a year. Undoubtedly, it would also be enough for many smaller developing countries.

Another problem is that even as demand grows, the sources of water aren’t self-replenishing. We use up a lot of water, and the planet can’t restock instantly. That means we’ll need to look for newer sources of water.

The North American shale revolution has done dramatic things to oil and gas. Just a decade or so back, people were beginning to become very concerned about Peak Oil. And OPEC’s tight fist didn’t bode well for much of the world—both Western and the developing one.

Now, there’s so much natural gas being produced in the U.S. that we need to burn off excess gas. We’re building terminals to export excess gas to feed Asian demand for more and more fuel.

Likewise, we’ll have to look toward different sources of water to counter the growing demand.

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What's Being Done?

Companies are making some headway. Over in India, General Electric (NYSE: GE) has been developing advanced technologies that could help India deal with various water-related challenges.

GE’s work there so far involves membrane-filtration systems, membrane bioreactors, zero liquid discharge systems, and various chemical developments to address water treatment issues.

Another company, Va Tech Wabag (NSE: WABAG), has put its faith in water desalination.

NewsTrackIndia quotes the company’s managing director, Rajiv Mittal:

"The Indian desalination water market is growing at a compounded annual growth rate (CAGR) of 30 percent over a period of five years from 2013 to 2018. The desalination capacity in India is seen at 5,350 million litres per day (MLD) by 2018."

In fact, the company has joined forces with Spain’s Cadagua and Oman’s Gaifar to develop a massive water desalination project in Oman. The deal is worth $250 million.

Clearly, steps are being taken to make sure the water that is so needed just about everywhere—from cooking to fracking—continues to flow. It would appear Mr. Rogers may be very correct in pointing out that water will likely become a major business in the very near future.

 

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