Well, folks, water investments have once again become a big a topic on the Street. I first noticed the resurrection early this month when CNBC's website ran water-related articles two days in a row.

It seems to me that interest in the water sector gets a jolt about every three or so months, lasts for about a month, and then disappears until the next equinox or solstice.

Taking notice of this trend is important for several reasons.

First of all, it highlights the pervasive issue of a growing lack of fresh water--even if it is only covered cyclically in the mainstream media.

Secondly, the quarterly interest in the water sector gives some indication as to how investors should be playing this great opportunity.

Tackling Water Related Investments

If you want to make real money investing in water, you first have to resist the initial temptation to invest in water utilities. You know from your water bill that the stuff is still fairly cheap, and the government typically steps in to keep it that way.

As a caveat, I'll say that water utilities can provide safety and pay nice dividends--two welcome advantages in these turbulent times.

But, if you're like me, you're looking for faster, harder hitting gains. And those too are possible in the water sector. The trick is either finding the companies that allow utilities to constantly supply clean water or finding novel ways to conserve or use water differently.

I've dubbed the companies allowing utilities to constantly supply clean water the "water works." These include products like pipes, water treatment chemicals and technologies and intermediary devices like pumps and valves. These are market segments the water sector invests over $500 billion on annually.

One of the stalwarts in this industry is Flowserve Corp. (NYSE: FLS). The company, with customers in over 70 countries, supplies pumps, valves and seals automation to the water industry as well as to the oil, gas and chemical sectors.

That makes it an indirect water play that will also do well in an energy bull market. Flowserve is in the Green Chip Water Index and has delivered a 96% gain since early 2007. Take a look:

Beyond the Water Works

This is the water-related sector that excites me the most. It offers seemingly limitless ways to play the increasing commoditization and value of fresh water.

Of course, one of the industries that use the most of this precious resource is agriculture. In fact, over 80% of the nation's water use is attributed to agriculture. That number is over 90% in many western states.

And if you've been paying attention, you know that the American Southwest and Southeast have been experiencing prolonged drought. The same holds true in many regions around the world.

Yet, the world's population--all 6.8 billion of us (and growing)--needs to eat.

So to keep all the major fruits, grains and vegetables (water for livestock is a separate issue) on the table, some advances are going to have to be made in the way we use water for irrigation.

One such solution has come in the form of new crop irrigation equipment manufactured by Lindsay Corporation (NYSE: LNN)--also in the Green Chip Water Index. Their hi-tech oversized sprinklers allow entire fields to be watered, while the units are remotely monitored and moved.

They're even equipped with GPS and sensors to make sure no excess water is used. These models also conserve energy and labor costs, as they are able to be moved without additional machinery, unlike previous models. Farmers all over the world are flocking to these machines.

Since I mentioned the stock a few weeks ago in Wealth Daily it has climbed nearly 20%, fueled partly by good earnings.

With an agricultural commodities boom well under way I continue to like any water-related stock that plays this angle.

And if you're looking for a really obscure way to play the water crisis, you may want to consider buying milk. Dried skim milk has gone from $1,600 a ton to over $5,000 a ton in the last five years.

I'm being quasi-facetious, of course. Although I've actually recently been hearing of investors buying crop futures to play water shortages. Cotton comes to mind for the currently arid Southeast.

Until next time,

Nick

P.S There are three stocks in the Green Chip Water Index with gains of well over 90%. In the coming weeks I'll be putting together an Explosive Water Index for my new service, Alternative Energy Speculator. They'll carry more risk, but returns will be even bigger. If you're interested, I encourage you to read more about the service.

www.energyandcapital.com