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alasker (< 20)

Global Water

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October 20, 2009 – Comments (8) | RELATED TICKERS: ERII , PICO , HOO

This is my first attempt at a blog 

Looking at the Macro trends in the USA lots of companies are laying people off and those who do have jobs in the private sector are cutting back on spending for fear of being laid off or finding employment at considerably less than they were making.

It is my guess that people will still buy things during the holiday season, but instead of spending 1,000 dollars they may only spend 400 dollars. Furthermore, the network of town, city, county, state & federal bureacracies with pension plans and employees paid twice the amount of the private sector plus the 1/2 of our population receiving government assistance will necessitate higher taxes on anything that moves, breaths, and probably things that do not breath. I know of 1099 employees where the government takes 60% of their income off the top- not including property taxes and sales taxes. Add to that a 10-22% annual increases in healthcare (NY State has healthcare, not health insurance).

I am finding myself asking what to do with a small amount of money I set aside for investing outside of my 401K. Fixed income (treasuries, freddie/ fannie, corporate) of any kind seems to be a bad bet at the moment as well as any company who does most of their business in the USA in US dollars. Financials, retail, transportation, or anything that is a luxury (I know that is a broad brush) is also out for me in the short term. I am staying away from metals because everyone on TV is telling me to rush in and you can't eat gold or silver. Instead I am focusing on USA companies who get a lot of business overseas, who have a nitch and rapid growth potential. I am also avoiding the big multi-nationals because they attract too much attention and i have them in my 401k.

Although demand for water or people's ability to pay for water in the USA may decrease in the short run as people lose homes and manufacturing decreases, I think globally the demand for water will increase in the long run. Long term in the USA we have desertification, decreasing water tables, and I believe there is not one spec of ocean in the entire world that does not have plastic particles that make it into the fish we eat. That is why I am dipping my toe into Energy Recovery, Cascal, Ormat and Pico.

I like Cascal because it is a global niche water utility play and has its parent company Biwater to provide stability. My quiziness about ERII's PE ratio is not as great at the potential I see for their product globally when energy prices go back up. Ormat is not really a water play, but the water is reused through their systems so I'll call it water nuetral. PICO is not very global, but there is not any other way to play water as a commodity in the USA as people flee California for the states where PICO is building pipelines. I also have money in Calvert Global Water (CFWAX) because I'm not a good investor but believe in the sector.

Anyone else out there got any ideas?

I think the future will be like an israeli kibbutz i was reading about that uses water collected naturally to consecutively heat a greenhouse, then grow fish, then grow custaceans, and then finally use drip technology to grow fruit.

 

8 Comments – Post Your Own

#1) On October 20, 2009 at 12:22 PM, lemoneater (75.60) wrote:

Thanks. Interesting topic. Clean water is very important. I've thought about investing in TINY a VC company which holds many starting nanotech companies. I've heard that nanotechnology can make better filtration for cleaner air and water.

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#2) On October 20, 2009 at 12:35 PM, Deepfryer (91.56) wrote:

I've been interested in the water industry as well. There are a few ETFs in this sector: CGW, FIW, PHO, and PIO. Their performance hasn't been anything remarkable - they perform fairly similar to the S&P 500.

I looked at some of the specific companies in those ETFs, and the one I really like is FLS. They make valves and gauges - very boring, but important. They do a lot of business in the water sector and their valves are also used in nuclear power plants, and in the oil industry... and probably a lot of other places as well. They have very good fundamentals.

I would like to find some small-cap companies in the water purification business, but I haven't found any so far... at least none that look like a good value.

If you want a more speculative pick, you could look at DGW. I don't know too much about it though, so you are on your own with that one!

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#3) On October 20, 2009 at 1:23 PM, leohaas (99.27) wrote:

No sure what the "1099 employee" remark has to do with all this (by the way, if you work on a 1099, you are not an employee; get incorporated!), but your observations about water are correct. This is a global problem. One look at Lake Powell or Lake Mead will tell you how serious the problem is getting in the US (and in AZ they are still thinking that the Colorado can deliver more water "because Arizona takes less water out of the river than allowed per the Colorado River Compact", yeah right...)

So, investing in the water industry is a good idea. If you do, keep in mind that it may be years or even decades before these investments will boom. In most places in the US we are still in denial that we even have a problem...

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#4) On October 20, 2009 at 1:59 PM, alasker (< 20) wrote:

Thank you "leo hass". You are correct and I will try to remember to be more on topic in my future posts. It was my first post and I had too many ideas bottled up. Tangents and Ranting does not help the members with investing.

I would add that people with roof collection systems in north america need to worry abut pesticides in africa that get blown into the atmosphere & settle here. The winds have always been blowing nourishing salts from Africa- now its just tastes different 

If no one has read about the "great pacific garbage patch"- wikipedia it. There are a bunch of them out there and if we stopped dumping today- it would get larger for years because of the time delay to fill it.

Also- I love the pictures of national geographic of people in india bathing in the rivers. Or the number of toxins a baby is born with here in the USA because his/her mother has been injesting junk. Or the fact that our water utilities only test for a certain number of chemicals- would you like estrogen with your tap water?

Think about how many states have serious water disputes here in the USA- cough- Georgia. Think about Israel/ Syria and the Golan heights- water. I can imagine future problems south american Guarani aquifer that borders 3 countries. good thing australia which has the worlds largest known aquifer is also its own continent.

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#5) On October 20, 2009 at 1:59 PM, bcnu6 (41.31) wrote:

I like (and own) Hyflux Ltd (HYFXF.PK).  It is based in Singapore, often described as the most business-friendly nation, and has projects there, in China, and North Africa.  It is looking at other opportunities in India and the Middle East.

Hyflux is not traded on any U.S. exchange, and while there are some ADRs out, they are so thinly traded that I think one is better off buying them off a foreign exchange, even if there is an additional service charge to do that.  

Hyflux primarily does desalinization, but but also makes membranes for various purposes (including used oil recycling).  It constructs desalinization/purification plants, and a subsidiary operates them.  While there are risks, I think that over the long run my Hyflux holdings may turn out to be my best investment ever.

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#6) On October 20, 2009 at 3:11 PM, Schmacko (96.39) wrote:

GE works on desalination technology as well, but it's obviously not a pure play.

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#7) On October 20, 2009 at 3:23 PM, alasker (< 20) wrote:

I had GE for about a year and decided to sell it. Actually took a $1.00 per share loss because it is too complicated for me. For every sector like water that is great, you have another like railroads that underperforms. Wind turbines are great, but financials and NBC is risky. I truly have pitty for the auditor at the IRS who gets to look at their annual filings. It is also tough to see growth because it is easier to go from 5 million to 10 million in revenue then it is to double 180 billion in sales.

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#8) On October 20, 2009 at 3:24 PM, Deepfryer (91.56) wrote:

Came across these, haven't had a chance to look at them yet: 

http://caps.fool.com/tag/water-utilities.aspx?

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