Water Share Thoughts


Water equity investments could get warm soon.

A recent message on Green and Ecuador cars message looked at how  investors can cash in by investing in green shares that are vital to society in the long term… but are depressed more than the norm due to short term economic concerns.

This economic distortion may be especially true of water shares.

I am looking for water shares that have extra value now and I began by looking again at our Green Portfolio.

There are six  shares in this portfolio and in 2007 the portfolio rose 266%. In 2008 it fell 208%.  This phenomenal rise and fall were of leveraged by a two times loan in yen.

I am not ready to leverage anything yet but some of these great shares may make sense as a medium or long term investment.

Name                                           Sector                 Currency

Vestas  Wind Turbines     Alternate Energy     Danish Kroner

Q Cells   AG                        Alternate Energy      Euro

Seche                                  Environmental           Euro

Novozymes                       Environmental          Danish Kroner

Hyflux Ltd                        Water                           Singapore Dollar

Kurita Industries             Water                          Japanese yen

Two of the six shares in this portfolio are involved with water purification and China  and Kurota provides diversification into the Japanese  yen which has been strengthening.

Kurita offers an investment in one of the world’s greatest economic concerns.

Water is at the forefront in economic development in the US, especially in the West.

Emerging nations have a water crisis as well.  Hundred of  Chinese cities are facing water shortages; farmers in the most-populous nation are forgoing millions of tons of grain production every year. Per-capita availability of water is expected to shrink to alarming levels by 2030.

India has a similar concern. According to the World Bank by 2050 demand for water in India will exceed all available supplies.

Therefore the green portfolio did exceedingly well before the crunch.

Now many in the market is worried that environmental shares will suffer, because the economy cannot afford to invest in the environment.

Water concerns cannot wait long especially with two of the world’s fastest growing economies facing serious water concerns, there is plenty of fundamental room for growth.

I also noted that both of my financial advisers had something good to say about Kurita without asking.

One wrote:

Kurita water Industry:  12 analysts follow this company.  Eight recomedn to buy, tow to hold and two to sell.  The average target price is Yen 2,275 (current quote 2,570).

The other said:

We feel that equities now provide decent prospective returns from current
levels over the next 5 or 10 years.  Many investors are now putting risk
back on the table.

In the US Money Market Funds now have more cash than all the equities in equity funds.  Something I have never seen before.

Recent weeks have seen $5bn flowing back again, showing the effect of
the pent-up liquidity earning low returns.

For protection against future inflation certainly Real Estate and Shares
but in addition you might consider Index-Linkers and Gold royalty
streams.

I have been keen on thematic investing globally as you may remember.
The sectors/themes that I favour for the continued recovery in markets
include  water.  Funds that might be used to put into place such a strategy
are
Kurita Water and Water ETF.

Here is a recent chart of the Kurita share price.

kurita-chart

I love investing in water and have been recommending water shares for about a decade now.

You can read more about Kurita here.

We are in North Carolina at our farm and recently had a record number of days with measurable rain (13 days in a row I believe).

Our creeks were roaring.  This is normally a small stream high up on the land.

water-investments

Here is one of our water falls in normal times and…

ecuador-water

After the rains.

water-investments

Here is another fall normal… and

ecuador-water

after the rains.

water-investments

This creates a degree of aggravation… such as washing out our roads, like this but…

water-investments

overall we are tickled. We love the water.  The large number of year round springs is one reason we chose this farm.  For example water gushes from the rocks at this one spring and…

ecuador-water

fills our deep woods hot tub…

ecuador-water

with continual fresh water, plus…

ecuador-water

provides all of the water supply in our house and helps fill this pond, plus…

ecuador-water

creates this water fall that fills a fish pond in our back yard as well as fills a stock tub in our chicken pen.

ecuador-water

This is just one of dozens of springs on the land.  We feel blessed as water is becoming one of humanity’s most precious commodities!

If investing in just the share of one compnay like Kurity does not suit you there is another way to get  good value water equities  now.

I am studying two water ETFs (Exchange Traded Fund).  One of the ETFs is the PowerShares Water Resources Fund.

This ETF invests in the shares that compose the Palisades Water Index which is an equal-dollar weighted stock market index that tracks the performance of companies engaged in the global water industry.   The PowerShares Water Resources Fund aims to match the performance of this index.

Shares in this index include pump and filter manufacturers, water utilities, and irrigation equipment manufacturers.

Here for example are the seven large holdings in the index:

* Tetra Tech (NASDAQ: TTEK) 4.58%
* Itron Inc (NASDAQ: ITRI) 4.12%
* Urs Corp (NYSE: URS) 4.07%
* AECOM (NYSE: ACM) 4.00%
* Danaher Corp (NYSE: DHR) 3.98%
* Badger Meter (AMEX: BMI) 3.95% (flowmeters)
* Veolia Environnement (NYSE: VE) 3.92%
This chart from Finance.yahoo.com  shows how this ETF  was clobbered in 2008.

water-investments

Yet the need for water has not diminished.  This makes the fund especially worthy of research… for value.

Investments go up and down. Markets get hot and rise.  Markets crash.  Fashion distorts markets but in the log term, fundamentals rule. There few fundamentals to life itself as important as water.

Gary

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