Surveying the Best Global Water Stocks

Written By Nick Hodge

Posted October 14, 2010

I’m going to throw a lot of information at you today, so get ready.

First I’d like to alert you to the show Liquid Assets, currently being aired by CNBC. The ‘about the show’ section goes something like this:

Water is our most precious natural resource. With only 3 percent of the world’s water existing as fresh water, nearly every continent is feeling the affects of the global water crisis. For some, it’s the lack of clean drinking water. For farmers, it’s the inability to feed the thirst of valuable crops. Just as “easy oil” has dried up, fresh water has become more difficult to access and transport.

The show chronicles water woes all over the globe, and how savvy entrepreneurs are rushing to capitalize on them.

CNBC’s description also calls water the “business opportunity of a lifetime.”

The next showing is October 24th at 8pm ET.

The most overlooked bull market

When you think of long-term, sustained bull markets… what comes to mind?

Oil? Technology?

Most people never consider water.

I’ve covered the fundamentals of this market too many times to recant. And if you want a good synopsis, check out the Liquid Assets homepage.

Instead, I want to show you how real this market is with recent events…

Just east of Denver, a $653 million water treatment facility was opened last week. The plant, which can handle 50 million gallons per day, uses sand and charcoal to filter water and then purifies it with almost 7,000 ultraviolet bulbs.

It was commissioned after Aurora used 75% of its water supply during the drought years of 2002 and 2003.

That’s 2/3 of a billion dollars for one plant in a Denver suburb.

Jump to the United Arab Emirates, which said this week the cost of building and operating desalination plants will jump 300% in the next six years. By 2016, the country will be spending $3.22 billion per year on desalination while doubling its capacity to nearly 14 million cubic meters per day.

But it’ll take the UAE seven years of spending like that merely to equal a just-announced project in Australia.

An Auditor-General’s report out last week said a plan to drought-proof Melbourne with the continent’s largest desalination plant would cost taxpayers and water users $24 billion. That’s the nominal cost of the entire project — from land acquisition and environmental assessments to power supply and plant refurbishment.

The cost works out to $860 million per year for three decades.

That’s just three projects in three different countries… and we’re already dealing with $30 billion.

Folks, everyone on the planet needs water. Imagine how this market is going to play out over the next few decades.

Or just look at the present picture

A recent paper in the Proceedings of the National Academy of Sciences offers three concepts of Peak Water: peak renewable water, peak nonrenewable water, and peak ecological water.

The paper concludes the U.S. has passed all three peaks.

The flow of the Colorado River, for example, is exhausted every year as it supplies seven U.S. states and Mexico with freshwater.

It also reports the Yellow River, the Nile, and the River Jordan are all “reaching their peak limits,” with flows typically falling to zero before they reach their end.

The Asian Development Bank (ADB) is sounding warning bells as well. It said in the next two decades a “severe water crisis… could hamper the region’s growth,” and offered these bullet points:

  • Asia will face a 40% shortfall in water supply by 2030

  • Food demand will grow 70%-90% by the same time

  • Irrigated agriculture has not grown by more than 1% annually since 1990

That’s a recipe for disaster.

Here’s a recipe for fortune…

The ADB report was straightforward in its recommendation for a solution: treat water supply as a business.

According to Arjun Thapan, the report’s author, “If any major dents are to be made in closing the forecast 40% gap between water demand and supply in 2030 in Asia, this is where most of the gains will have to come from: demand management.”

That means fixing faulty meters, replacing leaking pipes, building new treatment and reuse facilities, and pricing water to improve conservation by industry users like utilities and farmers.

And it also means big business for companies providing those services, like the $30 billion worth of projects mentioned above.

The wealth potential isn’t hard to see:

Global Water Stocks

That’s an agricultural irrigation provider, a Chinese water infrastructure expert, a Brazilian water utility, and an American water meter maker. And each has taken off in the past few months because this is a global problem with global profits.

But the best profits are yet to come, as this problem is expected to grow for decades… attracting more and more investors all the time.

One of the best ways to get ahead is to find the best desalination play you can find and load up.

I’ve not only found one that has direct ties to Asia, but one that’s poised to sell billions worth of desalination units. And you can still buy it right here in the States for less than a buck.

These stocks have been climbing quickly, and there’s no time to wait to stake your claim to the most overlooked bull on the market.

Call it like you see it,

Nick Hodge


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