Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21
Investing in Google Deep Mind AI 2021 (Alphabet) - 6th Apr 21
Which ETFs Will Benefit As A Stronger US Dollar Reacts To Global Market Concerns - 6th Apr 21
Staying Out of the Red: Financial Tips for Kent Homeowners - 6th Apr 21
Stock Market Pushing Higher - 6th Apr 21
Inflation Fears Rise on Biden’s $3.9 TRILLION in Deficit Spending - 6th Apr 21
Editing and Rendering Videos Whilst Background Crypto Mining Bitcoins with NiceHash, Davinci Resolve - 5th Apr 21
Why the Financial Gurus Are WRONG About Gold - 5th Apr 21
Will Biden’s Infrastructure Plan Rebuild Gold? - 5th Apr 21
Stocks All Time Highs and Gold Double Bottom - 5th Apr 21
All Tech Stocks Revolve Around This Disruptor - 5th Apr 21
Silver $100 Price Ahead - 4th Apr 21
Is Astra Zeneca Vaccine Safe? Risk of Blood Clots and What Side Effects During 8 Days After Jab - 4th Apr 21
Are Premium Bonds A Good Investment in 2021 vs Savings, AI Stocks and Housing Alternatives - 4th Apr 21
Penny Stocks Hit $2 Trillion - The Real Story Behind This "Road to Riches" Scheme - 4th Apr 21
Should Stock Markets Fear Inflation or Deflation? - 4th Apr 21
Dow Stock Market Trend Forecast 2021 - 3rd Apr 21
Gold Price Just Can’t Seem to Breakout - 3rd Apr 21
Stocks, Gold and the Troubling Yields - 3rd Apr 21
What can you buy with cryptocurrencies?- 3rd Apr 21
What a Long and Not so Strange Trip it’s Been for the Gold Mining Stocks - 2nd Apr 21
WD My Book DUO 28tb Unboxing - What Drives Inside the Enclosure, Reds or Blues Review - 2nd Apr 21
Markets, Mayhem and Elliott Waves - 2nd Apr 21
Gold And US Dollar Hegemony - 2nd Apr 21
What Biden’s Big Infrastructure Push Means for Silver Price - 2nd Apr 21
Stock Market Support Near $14,358 On Transportation Index Suggests Rally Will Continue - 2nd Apr 21
Crypto Mine Bitcoin With Your Gaming PC - How Much Profit after 3 Weeks with NiceHash, RTX 3080 GPU - 2nd Apr 21
UK Lockdowns Ending As Europe Continues to Die, Sweet Child O' Mine 2021 Post Pandemic Hope - 2nd Apr 21
A Climbing USDX Means Gold Investors Should Care - 1st Apr 21
How To Spot Market Boom and Bust Cycles - 1st Apr 21
What Could Slay the Stock & Gold Bulls - 1st Apr 21
Precious Metals Mining Stocks Setting Up For A Breakout Rally – Wait For Confirmation - 1st Apr 21
Fed: “We’re Not Going to Take This Punchbowl Away” - 1st Apr 21
Mining Bitcoin On My Desktop PC For 3 Weeks - How Much Crypto Profit Using RTX 3080 on NiceHash - 31st Mar 21
INFLATION - Wage Slaves vs Gold Owners - 31st Mar 21
Why It‘s Reasonable to Be Bullish Stocks and Gold - 31st Mar 21
How To Be Eligible For An E-Transfer Payday Loan? - 31st Mar 21
eXcentral Review – Trade CFDs with a Customer-Centric Broker - 31st Mar 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Investing in Water Stocks: Profit from the New "Water Market"

Companies / Water Sector Aug 03, 2012 - 06:01 AM GMT

By: Money_Morning

Companies

Best Financial Markets Analysis ArticlePatrick Vail writes: Investing in water stocks is about to become one of the hottest trends in 2012.

That's because the days of easy access to cheap commodities are drawing rapidly to a close. In the coming years, the prices of commodities are going to skyrocket - thanks to exponential growth.


Exponential growth in the Earth's population - over seven billion people and counting - means that all of the planet's finite resources are going to have to stretch farther to feed and fuel even more people. Everything from oil and gas to corn, wheat, potash, rare earth metals, timber - everything - is going to be harder to come by, and more expensive to procure.

We're also seeing similar growth in the population of the world's middle class, which means a rise in demand for everything a middle class existence entails, including meat (which requires more feed and processing - which means oil - to bring to the table), smartphones, cars, flat screen televisions, and everything else that we in the West enjoy, and even take for granted.

Including clean water.

Population Growth Creates a New "Water Market"
In places like China, India, and Latin America, where the burgeoning middle class is set to explode in the coming years, water use is already on the rise.

In the United States each person uses around 150 gallons of water per day, compared with around 20 gallons per day in emerging economies.

But global water usage is surging. What we take for granted in the West is in many cases just becoming the standard in many emerging markets around the world.

In fact, China and India already have the two largest water footprints (a broad measurement that aims to quantify global water use and consumption) of any country on the planet. And they're about to get even bigger as their consumption of commodities - water included - skyrockets.

But while other commodities are essential to our economy as it currently functions, water is the only commodity that is absolutely essential to our survival, and cannot be substituted. As the existing supply of potable water gets smaller, and the population grows, more experts and analysts are predicting the formation of a "water market."

In 2009, Jonathan Adler, director of the Center for Business Law and Regulation at Case Western University School of Law, wrote, "Without substantial reforms, existing water institutions will have difficulty meeting current demands, let alone the increased demands of the future."

Last year, Citigroup Inc. (NYSE: C) chief economist Willem Buiter said he expects to see water make the transition to an asset class within 30 years.

"Once the spot markets for water are integrated, futures markets and other derivative water-based financial instruments - puts, calls, swaps - both exchange-traded and OTC will follow," said Buiter.

A water market would simply mean that water would be bought and sold the same way that oil and other commodities are today. Whether this happens or not, the price of water would go up (you've probably seen your municipal water bill rise steadily over the past five years), which means that companies that control the water supply - water management and utility companies - stand to benefit tremendously.

In 2010, the last year for which there's comprehensive data, worldwide revenues from water totaled more than half a trillion dollars. Almost half of that total, some $226 billion, was collected by water utilities, treatment plants, and distribution centers around the world.

Investing in Water Stocks
The water business is booming, and delivering clean water at a premium is something Companhia de Saneamento Basico do Estado de Sao Paulo (NYSE ADR: SBS) does very well.

We still like the Brazilian utility for a number of reasons, not the least of which is its location. SBS sits in one of the world's leading emerging economies, and in one of the best regions for growth - especially growth in the middle class.

Beyond that, it's a well-run company. It's got a market cap over $9 billion, trades on volume, and has a very attractive price/earnings (P/E) ratio of 11.90. Since we last checked on the stock, SBS has climbed another 4.7%.

American States Water Co. (NYSE: AWR) is a California-based utility that owns 120,000 acre-feet of water to meet the demands of its customers.

AWR operates two wholly-owned subsidiaries, Golden State Water Co. (GSWC) and American States Utility Services Inc. (ASUS). GSWC is a public utility company regulated by the California Public Utilities Commission, and engages primarily in the delivery of water service to over one million people. ASUS operates and maintains the water and wastewater systems at numerous military bases around the country through 50-year government contracts.

Since March, the stock is up almost 12%. It has a P/E of just over 15, which is well below the industry average. With a beta of 0.51, AWR is just over half as volatile as the markets, making it a great defensive position, too.

Heading into the 2008 financial crisis, Veolia Environment SA (NYSE: VE)was massively over-leveraged, and shareholders have since paid the price. In 2007, the stock was all the way at $97; today, it's trading around $11.

But the French water management company has been selling off non-core assets, selling its UK water and European solid waste businesses for $1.9 billion each. Debt remains high, but the company plans to cut that from $23.7 billion to $14.7 billion by the end of 2013. To achieve this, the company will divest its transportation business as well as its solid waste business in the U.S.

This is all in an effort to lower operating costs, boost margins, and reposition itself as a low-cost alternative in core competencies, with a serious eye toward expansion in the developing markets in Eastern Europe and China.

After a much-needed cut in the company's dividend, VE still yields 7.4%. It has a forward P/E of about 8.0, a peg of around .90, and it's trading at less than two-thirds of book value.

For those interested in investing in water stocks and other assets set to rise with the world population, we want to share with you this latest research from our Money Map Press team. There are looming shortages in not just water but food and natural resources - and the data is frightening. This research uncovers a startling pattern about where our economy is headed - check it out here.

Source :http://moneymorning.com/2012/08/02/investing-in-water-stocks-profit-from-the-new-water-market/

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules