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Finding Opportunity in the Exciting World of Sewage Pipes... A “Blue Gold” Company Ready for Your Portfolio
Today, Davos is a popular spot for world improvers to get together and offer solutions to the world’s many ailments. By world improvers, I mean political types and people with lots of money to throw at endowments and rock stars who like to talk about ending poverty. At Davos, you could easily run into Bill Clinton, Bill Gates and Bono. I normally don’t pay much attention to this sort of thing. But the topics that garnered the spotlight were of interest to me. And the fact that these topics figured so prominently in this year’s conference means something. If nothing else, it is another marker along what has been a long road to recognition. I’m talking about the unfolding water crisis and its thematic ties to a widening nexus of related issues — including energy, global infrastructure and food supply. As the Financial Times reported: “a central theme of this year’s forum: the growing scarcity of resources, from clean water to affordable food to accessible oil.” U.N. Secretary-General Ban Ki-Moon told the assemblage at Davos: “What we did for climate change last year, we want to do for water and development in 2008.” He warned that water stress was a link between rising food prices, disease and conflicts such as the one in Darfur. According to the FT, “Water has displaced climate change as Davos delegates’ chief worry outside the U.S. economy, with no fewer than nine water-related events on the program, compared with just one last year.” The ties to food prices are probably obvious. The agriculture industry is normally the biggest consumer of water in any country. The growing scarcity of fresh water is a contributor to higher food prices. The World Food Program says that the pressure in global food markets is so intense that for the first time in its history, the program is finding it hard to procure supplies. **********Only a Few Hours Left********** 800 Billion Barrel Oil Deposit There is an untapped oil deposit in the Rocky Mountains that only one company has the key to unlock. This could be the biggest oil breakthrough we’ve seen in years. This revolutionary new technology is a way to produce oil in places no drill can reach. To find out which company has the key, click here… *************************************** I thought that was an interesting anecdote from the summit. Here’s another: PepsiCo has launched a partnership that will help bring clean water to Africa, China, Brazil and India. For soft drink makers in particular, and food producers generally, having a reliable source of water is absolutely critical. So this partnership will raise funds used to fund long-term water projects, improve sanitation and provide access to clean water. Every week, I read something about people getting sick in China because of exposure to contaminated water. Most recently, I came across this from Water Tech News: “Water quality is an ongoing issue in China, where recent government figures show that 90% of the country’s groundwater and 70% of its surface water is contaminated, according to a Jan. 16 AFP report.” I’m not going to get into depth about the issues addressed at Davos. My main point here is to show how this issue has begun to get serious attention — finally. And of course, I always like to remind people that this is not just an issue limited to faraway international markets. We’ve got serious water issues developing here in the U.S. The most recent report out of the EPA in January outlined needs for $202 billion to control wastewater pollution. The problems are the usual suspects: an old and leaky system. Plus, we continue to ask more and more of these overburdened systems as population grows. The latest issue of the trade journal Water Efficiency confirmed this: “In North America, many new municipal water systems went in after World War II, in the ‘50s and ‘60s. Now as these systems reach their half-century mark, they need more and more attention... With the average age of systems now being 40-50 years, but with a design life of 25 years, there is a major challenge looming with water systems. Corrosion is a main culprit.” The pipes start to leak...and that can cause sinkholes as the pipes absorb sediment, creating air pockets that eventually give way and swallow up sections of road, buildings, etc. Or sewage can leak out, causing illness and spreading disease and contamination. It’s been an issue for several years now. For investors, there is an easy way to profit from this: You simply buy one of the handful of companies involved in water pipe replacement and rehab. It can get tricky, because many water pipe companies also have exposure to the housing cycle. The replacement business grows nicely, but not nearly enough to offset the lost business in housing. At some point, that will reverse. Then earnings will recover rapidly. *************************************** How Do You Find Stocks That Double, Triple, or More? Answer: You Don’t — That’s My Job With My Super CXS Rating System! I Studied Past Winners — Like Merck, Where $1,000 Grew to $53,330 — and I Discovered Hidden Signs of Their Success! It’s no miracle that certain companies made investors fortunes. I am convinced that you can see tiny, early telltale signs of their future success. After my computer screens out all but the top 2%, I personally pore over the remaining companies and analyze mountains of information. These are the essential factors I use to determine profitability. *************************************** The link with housing can sometimes be subtle. For example, you wouldn’t think that maintenance expenses would track new housing construction. But it turns out that new housing construction — through tap fees — funds a large part of the basic maintenance infrastructure. So as new construction dried up, so did those tap fees — and so did funding for basic replacement and maintenance. Hard to believe, but true. Most of our infrastructure seems to operate on the principle of “Don’t worry about it until it breaks.” There is another company I’ve long followed. It was always too expensive and well loved for me to recommend. But I really liked the business. It depends somewhat on municipal spending for pipe replacement. And even though it has a great product and solution to the pipe problem, it seems municipalities are having a hard time finding the dollars for it. As a result, the market also hammered this stock recently, as revenues and earnings came in light. Then there was a self-inflicted wound when the company’s CEO left. Today, the company operates with an interim CEO. Doesn’t sound like a buy, does it? But these bad news items are all temporary and I think the selling is overdone. It is bad news like that that gets you the pricing you want. So for the first time in a long time, this business looks cheap enough to take a shot at. When the company finally finds its new CEO, I think that will be one catalyst for the stock price to move higher. Regards, P.S.: This company goes along with a report I wrote a while back. It is still completely relevant and includes three lucrative businesses that you need in your portfolio. Take a look here… |
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Chris Mayer, the editor of Capital & Crisis, began his career in banking, specifically, corporate lending, after earning an MBA with a concentration in finance, He later started writing Capital & Crisis, a monthly newsletter that gave Chris' unique brand of financial commentary a more regular and expanded format. With an unusual fondness for old books, old investors and old ideas, Chris fits perfectly into the Fleet Street mold. |
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