“In an age of global water scarcity, with governments scrambling to create new water systems or repair deteriorating ones, there is money in water,” he says. And Emmons isn’t the only expert who thinks water is soon to be a very valuable commodity. “Water is going to be more important than oil in the next 20 years,” predicted Dipak Jain, dean of the Kellogg School of Management at Northwestern University, to Bloomberg.

That’s thanks in large part to your local water utility. While cities and municipalities run 85% of water utilities, there are scores of for-profit companies left over to turn water into cash.

Utilities have become popular with investors in recent years for two reasons: stable sales and dividends. In most places, electric, gas and water utilities are highly regulated by the government, and they’re often allowed to operate as pseudo-monopolies in their markets. Couple that with the relatively level demand of utility customers and you have a recipe for fairly predictable sales numbers from quarter to quarter.

Utilities are also among the best dividend-paying industries.

But while that’s proved to be a great combination for investors who are looking for slow growth and slow income, growth-hungry small-cap investors have typically eschewed utilities for those very reasons. Until now…

Claim Your Stake in This Water Utility Stock

We’ve recently caught wind of a small-cap water utility based in the U.K. The company provides water and wastewater services to more than 4 million customers in seven countries. The company’s international exposure is what makes it especially interesting for investors looking for high growth – by entering new markets, the company managed to grow its sales 10 times faster than the rest of the industry.

Our unique water utility investment focuses on providing water services to developing countries with quickly expanding water needs. In addition to the U.K., the company has operations in South Africa, Indonesia, China, Chile, Panama and the Philippines. And in the last year alone, it’s managed some impressive milestones.

In China, a country where a quarter of the population doesn’t have access to safe water, the company secured two new projects that will eventually serve a combined 1 million people. It announced record new connections at its local subsidiary in the Philippines. And one of this utility’s biggest new South African customers is the new FIFA soccer stadium currently under construction – the stadium will be home to the World Cup in 2010.

Why This Stock Could Jump 166%

From a value perspective, we’ve got our eye on an impressive stock. Of all the small-cap water utilities currently trading, this company has the lowest P/E ratio. That means that you’re paying less for each dollar of our stock’s income performance than you would for any other company in its class.

The average P/E for profitable water utilities right now is 23. For our small-cap utility to trade at the average, its share price would be $9.70 – a full 166% gain from where it is now.

Part of the reason for that is the low profile the company has taken since it went public. This company’s shares weren’t traded on U.S. markets until the beginning on 2008, just as the stock markets were starting their yearlong descent. As more investors become aware of what this company is capable of, you can expect its share price to make its way back toward the $5-10 range.

To get access to the water utility in question, visit the Penny Stock Fortunes website.

Cheers,
Jonas Elmerraji

July 1, 2009

The Water Utility Poised to Jump 166% was originally featured in the Penny Sleuth.

Of course, this same indifference could be said about energy as well — at least until recently. It’s hard for the average person to be indifferent about $3.25 gas. And I suspect it will be even harder for him to stomach first $4, then $6.

And while energy prices affect everything from how much it costs to heat your home to how much you pay for a loaf of bread, the availability of potable water is paramount to your health.

I distinctly remember an interview I had with a health official a few years ago about the possibility of a worldwide flu pandemic. The discussion wandered off-topic to general health. He said that some of the most important advancements in medicine were improvements to public health. Advanced cancer research, robotic surgery and new, cutting-edge drugs are great, he said. But he also said standard vaccinations, health education (such as anti-smoking campaigns) and public water and sanitation are most responsible for the increase in quality of life over the past century.

Our longevity as a country has been dependent public health advances like these. And as America’s water resources dwindle and the infrastructure falls into disrepair, you can bet that states, municipalities and businesses spend every dime necessary to keep the pipes full.

Water’s Quiet Track Record

Water’s track record — though virtually unnoticed by the average investor — has been one of the best performers on Wall Street.

I was reading through some data online at the Gillespie Research Archives when I came across an older article by John Dickerson, president and CEO of Summit Global Management, Inc.

As it turns out, water utilities have been quietly outperforming the market for years. Check out this five-year performance comparison:

5-Year Summary: Dec. 31, 1998 – Dec. 31, 2003
———————————-
                                Total Ret.         Annual
———————————————–

Water Utility Stocks    107.96%          15.77%

                                     S&P 500 Index              -2.81%           -0.57%

                                     Dow Jones Industrial     24.97%            4.56%

                                     Nasdaq Composite        -7.04%           -1.45%

“A striking and very illustrative fact is that we have not found any randomly selected five-year period in the last 25 years (1982-87, 1993-98, 1979-84, etc.) where water utilities were not among a very small group of best performing sectors in the U.S. stock market,” Dickerson wrote.

In fact, two water utilities were some of the best performing stocks between 1983 and 2003. Philadelphia Suburban Corp., which is now Aqua America (WTR: NYSE), had a total return of 2,033.07%, or 16.52% annually, over this same timeframe. SJW Corp. (SJW: NYSE) boasted total gains of 1,433.28%, or 14.61% annually.

To put this in perspective, Aqua America outperformed both General Electric and Exxon Mobile from 1983 to 2003, as they posted annualized gains of 16.47% and 16.20%, respectively. During this 20-year period, only eight stocks outperformed Aqua America: Home Depot, Wal-Mart, Gillette, Coca-Cola, Merck, Johnson & Johnson, Disney and Procter & Gamble. General Electric came in tenth.

And I’d bet money there’s only one company on this 20-year top-10 list that the average person wouldn’t recognize: Philadelphia Suburban Corp. (Aqua America). In what other sector could you find such a strong performer that has managed to stay under the public’s radar while clobbering the Street for 20 years? How much longer will it be before Joe Stockwatcher catches on? It might take a disaster before he opens his eyes…

It will take a true crisis for the common investor to notice these profitable water stocks. As the rest of the world slowly begins to wake up to “blue gold,” those who ultimately profit will be those who first recognized that the most important liquid on Earth is water, not oil.

Best,

Gunner
July 24, 2006

Silently Beating the Blue Chips was originally featured in the Penny Sleuth.