More Multi Currency Water


Our last update looked at the value of investing in water and the Green Portfolio below shows the investing power of wind and water.

Green Portfolio

Invested Value   Now

Seche Environnement 48,000.00 33,686.93

Novozymes B 48,000.00 43,568.64

Vestas Wind Systems 51,000.00 81,304.36

Kurita Water Industr 51,000.00 60,270.35

Q-Cells Ag 51,000.00 44,716.86

Hyflux Lt 51,000.00 50,453.31

300,000.00 314,000.45

This portfolio is still in a slight loss position because the $200,000 loan would cost $212,941.85 to pay off plus $3,969.00 interest due raises the debt load to $216,910.84.

To see all the portfolio updates click on garyscott-iii

That portfolio has recovered from the early 2008 dip because of two shares

Vestas Wind Systems. The $51,000 invested November 2007 there is now worth 81,304.36. The $51,000 invested in Kurita Water Industries is now worth $60,270.35. These two shares pull up the entire portfolio as the other four shares are still down over the last seven months.

Our last update also looked at the potential of investing in Clorox and mentioned we would look at other big cap companies that are turning green, saving water and investing in water purification.

General Electric, is such an example. GE is increasing its business in water-saving and recycling technology. GE’s CEO said that the company believes that, just as greenhouse gas emissions have been a big societal challenge, the same thing is true for water.”

The head of GE’s Ecomagination green technology division, stated that the price of water that is going to increasingly reflect its scarcity.

GE is on the water savings fast track for its own operation and plans to employ water re-cycling technologies at more than 1,000 plants around the world – mainly in the US, Europe and Asia. The firm expects to to save 7.4m cubic meters of fresh water a year.

GE by the way is pushing energy-saving lighting and renewable energy via its Ecomagination division. This division now boasts 8% of GE’s global turnover. The group, which reduced its own greenhouse gas emissions by 8% last year, separately announced a deal with oilfield services company Schlumberger to develop clean coal technology.

GE has an entire website devoted to the GE water ethic.

So how can one use GE?

One way to invest of course is to buy GE shares. Let’s run this through our seven point litmus test:

The tests we use are:

Good Management:
Fundamental Economic Drivers:
Good Market Valuation:
Good PE & Other Valuations:

Has captured Market’s Attention:
Rising Earnings:
Fits My Personal Position:

In short we look for shares of well managed companies that are selling at a fair value with growth potential and that have a record of rising earnings and rising share prices in a good value stock market.

+ Good Management: his is a no brainer…a leader for many years..2nd largest US company and rated AAA.

+ Fundamental Economic Drivers: Probably. GE is so diversified this is hard to grip. Its green division only represents 8% of sales now…but the company is spinning off some old world stuff like appliances.

– Good Market Valuation: The US is still ranked as a bad value market.

+ Good PE & Other Valuations: The P/E Ratio of 12.2 is about equal compared to the sector, the dividend at 1.24% not exciting but with a good 4.7% yield. The hard fallen share price is suggestive of good value though.

– Has captured Market’s Attention: Shares have fallen from a high of $42.15 in mid 2007 to $26.15 as of June 27, 2008.

A June 1, 2008 Reuters article says “Shares of General Electric Co (GE.N: Quote, Profile, Research, Stock Buzz), the second largest U.S. company, have limited downside and investors can now make a better case for buying the stock.

“The company’s shares, which are down about 18 percent year-to-date, have fallen out of favor with investors”, Barron’s said, “but are now trading in line with the price-to-earnings multiples of companies in comparable industries”.

The article also said that GE Chief Executive Jeff Immelt continues to buy shares.

+ Rising Earnings: This has taken place at a time when the three months ended 31 March 2008, GE’s Company’s increased 8% to $42.27B. Net income from continuing operations decreased 13% to $4.36B. Revenues reflect an overall increase in income from Infrastructure, Commercial Finance, Industrial, NBC Universal and GE Money segments due to organic growth. Net income was offset by increased cost of sales, operating & administration expenses and higher interest expenses.

This makes GE look a strong candidate for the future, but it may be an early time to invest. Watching for the price makes sense.

Even the most conservative investor can find interesting GE opportunities.

GE for example offers corporate notes which are an alternative to low paying Certificates of deposit.

Corporate notes are direct, unsecured investments in the debt of a corporation. They have added risk. They are not FDIC insured. Unlike short-term bond funds or money market funds, they are not diversified pools of investments.

They are unsecured credit, so in the case of default corporate note holders are treated as unsecured creditors.

Since GE Corporate Notes are rated AAA by Standard & Poor’s Corporation and Aaa by Moody’s Investors Service these are as safe as corporate notes can be plus they pay more.

Currently GE Corporate notes pay:

Notes up to $15,000 3.04%
Notes up to $50,000 3.20%
Notes over 50,000 3.35%

You can learn more at
http://geinterestplus.com/interestplus/

Finally there are GE bonds. They are about as safe as corporate bonds can be
but due to worries in the market yield a little extra now. Short term bonds yield about 3.2%. Here are a couple of examples.

3.875 08/15/2009 100.750 3.19 3.19 Aaa/ AAA
4.625 09/15/2009 101.575 3.272 3.272 Aaa/ AAA

If you wish to diversify into other currencies GE bonds can also pay a bit extra over government bonds.

GE bonds pay about 1.5% to 2.00% more than British government bonds in British pounds.

GE New Zealand dollar bonds yield about 7%.

GE bonds in Turkish Lira pay very high interest. Here are some examples.

12.25 10/08/2009 94.90 16.98%
16.75 16/04/2010 97.49 18.35%
17.47 16/04/2013 96.80 17.49%
15.75 16/04/2018 97.32 16.30%

You have a currency risk with the lira versus your currency, but these bonds are paying about a 12% r higher premium over dollar denominated GE bonds so if the lira steadies these will yield well.

READER COMMENTS

Here are reader comments about the last update.

Reader Comment: “Gary, Thank you for bringing water to the forefront, globally.

As a water professional, I could not agree more that plastic is not the
solution. However, neither is Brita.

As you may know, a person gets more toxins from bathing water than from
drinking water. At the same time, in Ecuador, most people drink from plastic
bottles and bathe in tap water. The reason for drinking bottled water is
fear of micro organisms and parasites such as Guardia, that enter the system
orally.

The solution is a comprehensive system such as EcoWater, a pioneer in the
business since 1925. This is a US company with international distribution,
green goals and representatives in Ecuador and throughout the world.

If you are serious about water, please let me assist in any way I can.

My Comment: I agree with this reader that Brita and most domestic filters are far from complete. Every reader may want to look further for their own health.  Personally in North Carolina we drink only spring water right from its source.  We have an extensive ozonation system in Ecuador

However from an investing point of view I have not been able to see any way to invest in EcoWater.

Reader Comment: “Gary, in line with your current artical. There is a co. symbal that will aid our world with water treatment solutions 2nd to none. BSHF. They are contracted with Dubi,& Irac at the preasent time.
I have no ax to grind here other than this looks real promising.”

My Comment: I took a quick look at BSHF and it seems to flunk the first test in our seven filters “Good Management.”  This appears to be a company just entering the water business with one contract.  Maybe the management is good…maybe not…who knows…only time will tell.  As such this is a venture deal…not a solid investment.

This maybe great for stock venture investors but that is not what we are about

I NEED YOUR HELP

There is a lot written about water shortages but the reality is that there is plenty of water…just not enough FRESH water. Throw in the oceans and all shortages in terms of volume disappear. So the problem is one of quality not quantity. This opens the doors to desalination.

Perth, Australia for example, with a population of about 1.7 million, is growing 3 percent a year needs more water.

A company there, The Water Corp. turned to the nearby Indian Ocean to help solve the problem. The Kwinana Desalination Plant south of the city opened two months ago. The facility, the first of its kind in Australia, covers just a few acres in an industrial park next to the ocean.

The water is sucked in through a pipe about 650 feet offshore in Cockburn Sound, at a rate of about 0.1 meters per second, says project manager Simon McKay.

That is slow enough to let the fish escape, but fast enough to provide nearly 40 million gallons of drinking water each day — roughly 20 percent of Perth’s daily consumption. That makes the plant the single largest source of water for the city.

I am researching desalination and will wrote about it in future messages. If you have knowledge or ideas to share, let me know!

Until next message keep looking ahead. We do not have to look far to see the problem of too little fresh water. I look forward to helping you find the big opportunities that come from these problems.

Gary

Join me with Thomas Fischer of Jyske Bank as we update global investments at our October 3-5 at our International Investing & Business Made EZ course in North Carolina

International Investing and Business Made EZ Ecuador

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