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Investing in Water

Written By Nick Hodge

Posted April 17, 2009

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Have you ever heard of absolute water rights?

If you haven’t, you soon will.

It’s a story over a century in the making, dating back to Civil War times. But its effect has serious profit implications in present day.

It was the 1850s when the first water rights were decreed in Colorado. And by 1864 the entire base flow of the Purgatory River had been appropriated.

About the same time, hundreds of thousands of prospectors began searching for gold in the area. They were the participants of Pike’s Peak Gold Rush. You may know them better as Fifty-Niners, after the peak year of the rush.

But those miners not only secured a fortune for themselves, they unknowingly started a trend that would make you a fortune well over a century later.

An Absolute Right to Profit

Mining for gold requires an abundant supply of water for cleaning and moving sediment and rock. When Fifty-Niners diverted water to their mines, they used the same rules that applied to gold: first come, first served.

And that’s largely how it’s remained, albeit with a few changes in an 1882 Colorado Supreme Court case that allow rights to be transferred for better use.

But the rule of the 1850s still applies. If an entity was the first to physically divert water for beneficial use, it can be given the legal recognition that the right has been perfected, and the right becomes absolute by decree. That means whoever owns it has rights to the water even in dry years. . . even if citizens need it for drinking.

These rights can be bought and sold.

And guess whose in the market for them? Our friend Big Oil. They have been gobbling up rights like a communist regime. . . to the tune of about 50,000 acre feet at over 55 locations. And that’s not counting the hundred thousand or so acre feet they’ve secured via conditional rights.

You see, Big Oil knows water is growing more scarce by the minute.

The amount of freshwater we have stays the same, yet demand constantly rises, propelled by population, increased use for energy needs, and industrialization of the second and third world.

It’s escalating to a robbing Peter scenario. . . like when the Colorado River is diverted to quench Southern California or when we overuse the Rio Grande leaving Mexico with only muddy runoff.

Big Oil’s got the right idea. They’re scooping up water rights on the cheap, hoping to sell them later when shortages become acute and the price rises sharply. It’s an absolute right to profit.

And I’ve discovered a way for you to do the same.

Investing in Water

There are plenty of ways to invest in water. I’ve been writing about them for years, and have even nailed some triple-digit winners along the way.

But most of the water opportunities to date have been in companies that manage existing water. That is, in the infrastructure companies like Jacobs Engineering (NYSE: JEC) and Flowserve (NYSE: FLS) that provide plants and technologies to improve our water delivery system and better manage our existing supply.

As I said our water supply stays the same. . . only demand rises.

Changing that equation is a multi-billion dollar opportunity. And desalination does just that.

There’s been a lot of hype surrounding desalination and its potential to alleviate water problems. But scaling up has proven problematic because of the exorbitant energy costs associated with pressurizing the water for desalination.

That’s why only enough water was desalinated last year to cover 0.26% of world water demand.

I’ve discovered a company that will change all that by reducing the energy requirement for desalination by 60%. It will allow for the widespread use of desalination, and make its shareholders a fortune in the process.

I’ve seen plenty of great water plays, and I’m confident this one will outperform them all. Buying shares now is like beating Big Oil at their own game. You’ll own a piece of the company that will have virtual water monopoly for decades to come, securing your own “absolute” water rights in the process.

To ensure you take advantage, I’ve compiled a new report that spells out all the details. But you have to hurry. I just released this report yesterday, and the stock has already climbed 18%.

Call it like you see it,

Nick Hodge


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