Monday, August 20th, 2007
Water Starting to
Run Uphill
By Nick Hodge
The market had a pretty rough ride last
week, to say the least. At one point last Thursday, I struggled to find even a
hint of green peeking through a sea of red numbers.
I did, however, find the green I was
searching for, in the very sector I thought I would find it in. Water.
You see, while the Gloomy Gusses of the investment community were busy worrying about
a collapsed housing market, a looming credit crunch, and the resultant
illiquidity in the market, the wise investors began to do something I've been
writing about for quite some time.
Investing in Water
From last Monday morning to Thursday
afternoon, the Dow fell 5.9% or 783 points, from 13,238 to 12,455. And even
though many sectors were affected by this steep decline, a few choice water
plays showed some resiliency as they quickly rebounded ahead of the Dow.
The reason, in my opinion, is that water
is quickly developing into a crucial and expensive commodity. It's no longer
taken for granted as it has been for years.
When this whole sub-prime mortgage thing
broke, the housing market was obviously the first to go. After that, the homebuilders
sank, followed by building material manufacturers, suppliers, and distributors.
Next in line came retail.
As stock prices continued their downward
spiral, global investors began to panic. Even oil dropped more than $3 on fears
that a worldwide recession would mean less demand for fuel.
But no one questions the demand for water.
It's unrelenting and constant--no matter what shape the economy is in. Let's
take a look at how a few key water companies performed during Thursday's mayhem
on Wall Street.
Badger Meter (AMEX: BMI) withstood the
initial market decline, but fell victim later in the week. But after a brief
period of decline it quickly shot back up even stronger.
Southwest Water (NASDAQ: SWWC)
completely ignored the rest of the Street and continued plowing north.
As institutions struggled to find a place
for capital, water began to emerge as one of the safer places, and investors began
to inch their way back in.
More to Come
Water's recent momentum and associated
buoyancy isn't just a fluke. The world is running out of fresh water. And the
water infrastructure is in pretty bad shape as well.
To overcome these problems and ensure the
availability of fresh water to the more than 6.6 billion people that now share
the planet (we now add 75 people every 30 seconds), massive investment is going
to be needed in this sector.
In fact, the
This money will go to overhauling the
water and wastewater infrastructure, as well as to increased operations and
maintenance costs, and will result in increased efficiency, upgraded
facilities, and the installation of new technology.
Companies on the receiving end of this
investment are primed for explosive growth. Not only will more utilities be
entering the market in an effort to gain financing, but the companies that
supply the parts and technology to keep them in business will be going
gangbusters as well.
Pipe, pump, meter, and filter
manufacturers are already showing nice gains. And soon, as water is
commoditized and its price increases, resource management firms and companies
that possess rights to underground water will also be at a premium.
It is truly a great time to get into the
water industry. And, as always, Green Chip is first on the scene.
Earlier this month we unveiled our
members-only Green Chip Water Index. It contains 20 companies that are involved
in the water industry in all different ways. Just take a peek at one of the
companies in the index:
Since the beginning of the year, this
index has outperformed the Dow twice over--and it's only going to go higher.
To become a Green Chip member and gain
access to this special index, click here .
In addition to the water file, you'll also
get to the Green Chip portfolio, which is up over 62%, including five gains
over 200%.
Plus, you will get Jeff's latest
recommendation, a tiny solar stock ready for similar growth.
Don't wait. That tiny solar stock is up
16% just today.
Until next time,
Nick