Penny Stock Infrastructure Stocks

Dec 7th, 2007 | By Christopher Hancock | Category: Penny stocks

My passion for infrastructure began at an early age, a deeply ingrained, natural byproduct of my upbringing. You see, my father, the former mayor of a small West Virginia town, worked relentlessly to rebuild our quaint little version of southern comfort from the ground up. For better or worse, he constantly dragged me along.

My friends worked on farms. I spent my afternoons and Saturday mornings searching for water leaks. They rode John Deere tractors. I rode Caterpillar end loaders.

Around 1982, a rather substantial water leak on the south side of town brought out the picks and shovels. These calls were never routine. Municipal water leaks are tricky business.

You see, water leaks rarely surface in close proximity to the broken pipe itself. More often than not, concrete roads and sidewalks force water to trickle way down the line before it’s even capable of reaching the surface. Some leaks, in fact, never surface.

Meaning, you just don’t dig a big hole beneath a percolating puddle. Maintenance crews check various meters and pressure gauges, trying to pinpoint their proverbial ground zero. It serves to reason. Digging up roads isn’t cheap. Cities (and especially small towns) certainly don’t cut into roads unless they’re pretty confident they’ve located a problem.

Well, on that crisp spring afternoon, my dad and his crew felt confident they found their leak. And sure enough, four feet later, they were right. The broken pipe was no surprise. The fact that hollowed-out logs served as pipe certainly turned some heads, though.

Hollowed-out tree trunks acted as the earliest means for either water or sewage conveyance. Eventually, wood construction gave way to a more durable material. In fact, logs gave way to lead.

According to Marc Edwards, a civil engineering professor at Virginia Tech, the U.S. has over five million lead pipes in its water infrastructure today. Edwards said:

“Lead is a good-quality plumbing material, from the perspective that it lasts a long time and it does not break. Unfortunately, the little that can leach from those pipes into the water is sufficient to pose a serious health concern. More recently, the issue we’ve been discovering is pieces of lead from these pipes, and from lead solder, sometimes detach and, essentially, fall off into the water in pieces. This is very disconcerting, because in some cases, you can take a single glass of water, and if you’re unlucky and it has that piece of lead in it, you can get a very high dose of lead, similar to that which you could obtain by eating lead paint chips.”

Edwards estimates it would cost $1 trillion to completely correct this problem.

For a quick perspective, consider this: Mattel, the maker of Barney, Barbie and Dora the Explorer toys, recalled more than nine million toys because its products were coated with lead paint.

Mothers and fathers were outraged. China was vilified. Every news outlet in the country ran with the story. Zhang Shuhong, owner of Lee Der Industrial, a company that made toys for Mattel, hanged himself in a company warehouse over the incident.

Lead poisoning in young children can lead to neurological problems. But as Edwards points out, “There are no laws requiring lead testing or replacement of plumbing… Only 10% of schools have tested their drinking water in recent years.”

Meanwhile, our faucets continue to run.

Here in Baltimore, the public school system took action. It turned to bottled water. According to a report by Sara Neufeld in the Baltimore Sun, the city Health Department discovered that 10 fountains that had passed previous tests still contained unacceptably high levels of lead. After 15 years of efforts to remove the lead in its water fountains, Charm City capitulated.

We’ve addressed this matter before. The need for a national infrastructure overhaul remains paramount.

Going forward, I believe America needs an even greater commitment to nation building. Except this time, America needs to rebuild itself.

For investors, infrastructure stocks seem promising.

Currently, 73,518 of America’s 594,709 bridges — roughly 12% — maintain a “structurally deficient” classification. That’s the same grade the I-35W bridge in Minneapolis held just before it collapsed.

Interminable military obligations, rising prices, a declining dollar and a credit crisis with no end in sight can’t thwart our fundamental need to fix this problem.

So the question is… Will Uncle Sam start applying the Band-Aids before the next bridge begins to collapse?

Until next time,
Christopher Hancock
December 7, 2007

P.S.: My colleague, Chris Mayer, put together a report describing how to actually invest in this failing water infrastructure. Some of his plays have seen huge returns already. One of his older water plays, Lindsay Corporation (NYSE: LNN), gave his readers a chance at a nice 100% return in almost no time flat. Although, he recommended they sell shares of that company, he has plenty more in this report.

Christopher Hancock

Christopher Hancock lives and breathes emerging markets. He travels extensively and utilizes his contacts across the globe to recommend the best international investments in the world. After working with Citigroup in Hong Kong on the challenges and opportunities associated with the forthcoming RBM flotation reform, Christopher left many of his friends behind and decided to return to the States to pursue a career in equity research.

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