Investing in Water V


This site’s focus on investing in water is increasing because a key to profitable investing is spotting contrasts, distortions and trends. 

lake shot

This lake in our Florida back yard has dropped two or three feet in the last year.

Pure water is an essential for life.  The contrast is that the supply is falling… the demand growing.  That’s a given.  The trend is that share prices in companies that purify water have been falling.  This creates a distortion that creates value.

Investing in well managed water purification companies cannot lose long term.  How long is long term though?  The question is… What does the value look like now?

Also keep the words WELL MANAGED in mind.  Water companies benefit from the common set of long term tailwinds of increasing water supply-demand imbalances, massive infrastructure rehabilitation needs, new infrastructure requirements due to population growth and urbanisation, and increasing regulatory influences.

Water companies provide the operations, equipment, chemicals, and services that make water available for municipal, industrial, and agricultural markets.

Not all water companies are good stocks for investment.  The best performing 10% of global water stocks generally outperform the worse performing 10% by about 35 percentage points on any given month.

Not all good water stocks are ones to invest in right now.

The question is…. Is this the time to re-enter those investments?  If so which stocks are well managed?  Which water stocks are most likely selling at a good value and which are most likely to see a price rise.

Our search is for answers to these questions.

To begin this series we reviewed the valuations and prospects of three water shares we held in our green portfolio.  We recommended the portfolio in 2006. It rose 266% in a year and in late 2007… we urged readers to get out.  Good thing too as it fell nearly 200% in 2008!

Kurita Water Industries 

Kurita Water Industries Ltd., according to Bloomberg’s Business news is: a water and environmental management company, provides water treatment solutions in Asia. The company operates in two segments, Water Treatment Chemicals and Water Treatment Facilities. The Water Treatment Chemicals segment offers boiler water treatment chemicals, cooling water treatment chemicals, wastewater treatment chemicals, process treatment chemicals, incinerator chemicals, equipment and systems for water treatment chemicals, and packaged water treatment management contracts. The Water Treatment Facilities segment provides ultrapure and pure water production, wastewater reclamation, and wastewater treatment systems; and electrolyzed sulfuric acid generators, as well as engages in the ultrapure water supply business. This segment also offers tool cleaning, maintenance, soil remediation, and chemical cleaning services. It serves pulp and paper, steel, food and beverages, oil refining and petrochemicals, pharmaceuticals, LCDs, semiconductors, and electronic components industries, as well as regional heating/cooling centers. The company was founded in 1949 and is headquartered in Tokyo, Japan.

The headline at Kurita’s website is appropriately Zen for a Japanese company and says:  Study the properties of water, master them, and we will create an environment in which nature and man are in harmony.

That is a pretty good statement but does this make the shares a good investment now?

If this is a true reflection of the company’s mission then… long term… this is good.  Our goal though is to choose an appropriate entry time so that we do not have to wait too long for the share price to rise.  The share chart below shows that had we entered in the last five years… and if we had to sell… oops!

bloomberg kurita water share chart

(Click on photos to enlarge)

The Kurita share price in US dollars has fallen 14.97% over the past five years.

bloomberg kurita water share chart

The shares were hit even harder in the last year dropping over 20%.

How do the Kurita shares look now?  The big picture is strong… the world needs pure water.

Second, Japan is a good value market… so this is another positive value force.  You can see Keppler’s Major Market Valuations here.

keppler-analysis

Kurita shares look like they are nicely valued within the environmental sector as well,  currently selling in the 14 P/E range is below the industry average of 15.7.   The price to book ratio of just 1.09 is well below the sector average of 1.7.

Dividends at  2.33% and five year dividend growth at 6.45% are also both attractive in this market and sector.

Earnings are rising. The company had $93,552  million earnings and net income of $8,936 million March 2010 to March 2011. This rose to earnings of 104,277  million and  net income of 8,667 million  March 2011 to March 2012.

This is an upwards force on share prices.

Looking at the downside margins they were down in 2011 into 2012.

bloomberg kurita water share chart

This trend could worry analysts and keep prices lower or reflect a management or business problem.

Let’s review Kurita shares on the three important points about share investing.

#1: Cheap stocks outperform expensive stocks.  Yes, Kurita shares appear to be selling at a cheap price.

#2: Stocks in companies with rising earnings outperform stocks in companies with falling earnings.  Yes, the earnings are rising but income is down.

#3: Stocks with rising share price, attention in the market and high and rising earnings outperform stocks with low and falling earnings.  Kurita does not have a rising share price nor attention in the market.

In other words, look for high quality companies with share prices already in established up trends that are cheap (price earnings), with high and rising earnings and increasing attention from the market.

Kurita falls short for now in this context.

In thinking about your overall global portfolio balance keep in mind that Kurita represents  an investment in Asia and the Japanese yen.  Kurita is a Japanese company so ultimately its shares are affected by the yen.  However as a global business its earnings will come in many currencies which offset the Japanese aspect.

In the last year in yen the shares have a one year loss of -14.23%.  In US dollars the 1 year loss is -20.35%. In Euro the loss is -14.64%.

Regarding its Asian presence Kurita has a large and growing position in China also.  In June 2012, Kurita increased its investment in Kurita Water Industries (Suzhou) Ltd., a subsidiary in China.  This subsidiary engages in the manufacture, sales, operation, and maintenance of Chinese water treatment facilities.

Thus we have to remain focused on the Japanese/Chinese dispute over the uninhabited Senkaku (Japanese name) – Diaoyu (Chinese name) islands.

CBS News reported two days ago:  Chinese ships entered waters near a group of disputed islands for the first time in three weeks Thursday, prompting a strong protest from Japan, which says China’s air force has also sharply increased its operations in the area.

Japan’s Coast Guard said the four Chinese surveillance ships were spotted within a 22-kilometer (12-nautical mile) zone that Tokyo considers its territorial waters near one of the disputed islands in the East China Sea early Thursday morning.

The ships refused to leave, saying the area was Chinese territory, according to Atsushi Takahashi, a spokesman for the Coast Guard’s headquarters in Okinawa, which has jurisdiction over the islands. He said it was the first time Chinese ships had entered the territorial waters since Oct. 3.

Japan’s Foreign Ministry lodged a strong protest with China’s ambassador in Tokyo.

Kurita Water Industries appear to be a well managed company in a sector that supplies an ultra necessary commodity that has a limited supply and growing demand.   The shares are listed in a good value market and selling at extremely good value during this darkest hour when shares globally are depressed.  Troubled margins, potential military disputes and lack of attention on the shares in the market place mean that these are probably shares to put on your watch list rather than rush into now.

Kurita is traded in yen as the symbol 6370 on the Tokyo Stock Exchange.

Kurita is traded in US dollars as the symbol KTWIF:OTC in the US.

Kurita is traded in euro as the symbol KWI on the Frankfurt Stock Exchange.

Go to the final chapter in the “Investing in Water” Report – Click here.

Gary

Multi Currency Value Investing Seminar

Old Accord Creates New Profits – Multi Currency Investments.

Earn more with multi currency stock market breakouts.

Improve Safety – Increase Profits

Learn how to improve the safety of your savings and investments by selecting good value and diversified investments in a multi-currency portfolio.

Few decisions are as important to your wealth as the value of the markets and currencies you invest in.  This has been our area of expertise since the 1970s and we have worked with and advised some of the largest currency traders in the world.

Gain Protection First – Against the Dollar’s Purchasing Power Loss.  In 1913 the The Federal Reserve Act created the Federal Reserve Bank to protect the purchasing power of the US dollar, which has since lost about 94% of its purchasing power.  Here is its price compared with gold since 1900.

priced in gold

Dollar chart from pricedingold.com (1)

The Fed has let the dollar lose most of its strength plus has allowed interest rates to fall so low, that safe investments cannot keep pace with the drop in purchasing power.

multi-currency-chart

Chart from Grandfather Economic Report (2)

Many investors have forgotten about the risk of a falling dollar because the greenback has been strong for the past five years.  This temporary dollar strength came after the great recession of 2009 just as there was temporary dollar strength after the great recession of the 1980s.  Then about six years after the recession, an agreement was made by major governments to weaken the dollar.

There was a severe global economic recession affecting much of the developed world in the late 1970s and early 1980s.  The United States and Japan exited the recession relatively early, but high unemployment would continue to affect Europe and the UK through to at least 1985.  As a consequence between 1980 and 1985, the US dollar had appreciated by about 50% against the Japanese yen, Deutsche mark, French franc and British pound, the currencies of the next four biggest economies at the time. Then the governments reached an agreement and exchange rate values of the dollar versus the yen declined by 51% from 1985 to 1987.

Now the world is again in the same place.  The recession is over.  Europe is a bit behind in recovery and the dollar is higher than before the recession.

There is no reason for the greenback to be  strong.

The agreement in 1985 was called the Plaza Accord.   Over just two years the greenback dropped nearly 50% versus other major currencies.  The next accord will generate great profits for those who know what to do while it ruins the purchasing power of dollar back investments.

The strong US dollar and low interest rates have created one of the biggest stock and multi currency breakout opportunities in history.  Learn how to create a plan to profit from multi currency shifts ahead.

One reason for the potential gains is that stock markets and currency values are cyclical.  Due to low interest rates created by the 2009 economic downturn, the US and a few other equity markets have risen to some of their highest prices, ever.  These markets offer very poor value now.  The steep valuation creates incredible profit potential but also hides some enormous risks.  Learn how to develop an investing strategy based of earnings, cash flows, dividends and book values to increase potential for profit and reduce the risks.

Next Extra Profit Created by Value Breakouts

Over the history of US equity markets, the  price of overall markets have risen about 9.1 percent, respectively, compounded annually.  Yet over more than a hundred years of stock market activity,  a majority of the profits have come from just a very few dramatic breakouts.

Equity markets are ruled in the short term by emotions that create unpredictable ups and downs.  Numerous fears of defaults, worries of double dip recessions, high unemployment, concerns about fiscal cliffs, hold investors back.  Yet global population growth and advances in production and prosperity are relentless economic fundamentals that increase value.

When fear holds back a a fundamentally rising value, rising profit potential grows.  Values increase as prices stagnate.  Then markets break free and rocket upwards creating wealth, prosperity and growth.

Find out which breakouts are likely to take place next.

Stocks rise from the cycle of war, productivity and demographics. Cycles create recurring profits. Economies and stock markets cycle up and down around every 15 years as shown in this graph.

stock-Charts

The effect of war cycles on the US Stock Market since 1906.

Bull and bear cycles are based on cycles of human interaction, war, technology and productivity.  Economic downturns create war.

Here is the war stock cycle.  Military struggles (like the Civil War, WWI, WWII and the Cold War: WWIII) super charge inventiveness that creates new forms of productivity…the steam engine, the internal combustion engine,  production line processes, jet engines, TV, farming techniques, plastics, telephone, computer and lastly during the Cold War, the internet.  The military technology shifts to domestic use.  A boom is created that leads to excess.  Excess leads to correction. Correction creates an economic downturn and again to war.

Learn how the Cyber War (WWIV) may change the way we live and act and how this will affect currencies and investments.

Learn:

* How to easily buy global currencies, shares and bonds.

* Trading down and the benefits of investing in real estate in Small Town USA.  We will share why this breakout value is special and why we have been recommending good value real estate in this area since 2009.

* What’s up with gold and silver?  One session looks at my current position on gold and silver and asset protection.  We review the state of the precious metal markets and potential problems ahead for US dollars.  Learn how low interest rates eliminate  opportunity costs of diversification in precious metals and foreign currencies.

* How to improve safety and increase profit with leverage and staying power.  The seminar reveals Warren Buffett’s value investing strategy from research published at Yale University’s website.  This research shows that the stocks Buffet chooses are safe (with low beta and low volatility), cheap (value stocks with low price-to-book ratios), and high quality (stocks of companies that are profitable, stable, growing, and with high payout ratios), but his big, extra profits come from leverage and staying power.  At times Buffet’s portfolio, as all value portfolios, has fallen, but he has been willing and able to wait long periods for the value to reveal itself and prices to recover.

keppler asset management chart

This chart based on a 45 year portfolio study shows that holding a diversified good value portfolio (based on a  good value strategy) for 13 month’s time, increases the probability of outperformance to 70%.  However those who can hold the portfolio for five years gain a 88% probability of beating the bellwether in the market and after ten years the probability increases to 97.5%.

Time is your friend when you use a good value strategy.  The longer you can hold onto a well balanced good value portfolio, the better the odds of outstanding success.

Learn how much leverage to use.  Leverage is like medicine, the key is dose.  Buffett leverages his portfolio at a ratio of approximately 1.6 to 1.  This rate of expansion by the way is called the “Golden Ratio”.  It is a mathematical formula that controls the growth of most natural things; trees, the shape of leaves, the spiral of shells, as well as the way economies and societies grow.

We’ll sum the strategy, how to leverage cheap, safe, quality stocks and for what period of time based on your circumstances.

Learn to plan in a way so you never run out of money.  The seminar also has a session on the importance of having and sticking to a plan.  See how success is dependent on conviction, wherewithal, and skill to operate with leverage and significant risk.  Learn a three point strategy based on my 50 (almost) years of investing experience combined with wisdom gained from some of the world’s best investment managers and economic mathematical scientists.

Enjoy investing more with slow, worry free, good value investing.  Stress, worry and fear are three of an investor’s worst enemies.  These are major foundations of the Behavior Gap, a trait exhibited by most investors, that causes them to underperform any market they choose.  The behavior gap is created by natural human responses to fear.  The losses created by this gap grow when investors trade short term under stress.

Learn how to put meaning into your investing by creating profitable strategies that combine good value investments with unique, personal goals.

Learn how to span the behavior gap.  Behavior gaps are among the biggest reasons why so many investors fail.  Human evolution makes fear the second most powerful motivator.  (Greed is the third.)  Fear creates investment losses due to behavior gaps.  Fear motivates us more strongly than desire.  By nature investors are risk adverse, when they should embrace risk.  Purpose is the most powerful motivator,  stronger than fear and greed.  One powerful way to overcome the behavior gap is to invest with a purpose.

Combine your needs and capabilities with the secrets and the math of our good value model portfolio.

Share ideas about my good value portfolio.  My personal investment portfolio comes from a continual analysis of international stock markets and a comparison of their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return.

Markets included in this portfolio are:

• Norway
• Australia
• Hong Kong
• Japan
• Singapore
• United Kingdom
• Taiwan
• South Korea
• China

These markets have been chosen based on four pillars of valuation.

• Absolute Valuation
• Relative Valuation
• Current versus Historic Valuation
• Current Relative versus Relative Historic Valuation

Learn how to use Country ETFs to easily construct a diversified, risk-controlled, equally weighted representative country portfolios in all of these good value countries.

To achieve this goal my portfolio consists of Country Index ETFs that track an index of shares in a specific country.  These country ETFs provide diversification into a basket of equities in the good value countries.  The expense ratios for most ETFs are lower than those of the average mutual fund as well so such ETFs provide diversification and cost efficiency.

This is an easy, simple and effective approach to zeroing in on value because little management and guesswork is required.  You are investing in a diversified portfolio of good value indices.  A BUY rating for an index does NOT imply that any stock in that country is an attractive investment, so you do not have to pick and choose shares.  You can invest in the index which is like investing in all the shares in the index.  All you have to do is invest in an ETF that in turn invests passively in all the shares of the index.

Learn the results of a $80,000 share purchase cost test that found the least expensive way to invest in good value.  The keys to this portfolio are good value, low cost, minimal fuss and bother.  Plus a great savings of time.  Trading is minimal, usually not more than one or two shares are bought or sold in a year.  I wanted to find the very least expensive way to create and hold this portfolio so I performed a test.

The Test for Low Cost Trading

Research put every part of this portfolio in place, except knowing the best, easiest and least expensive way to buy.  A search for an optimal way to buy and hold boiled down to two methods.  One tactic to test was to use a unique online broker that appeared to offer the lowest cost deal.  The other approach was to use a community bank in Smalltown USA.  The small town bank that I use looks after my 401K trust account and their service is first class.  The benefit of small banks is that they still treat us as a human beings (instead of a number) and when we need, it’s easy to go right to the top to answer a question or get a problem resolved.  There are no call centers and the bank and the person looking after my account is just around the corner.

I created a test to see which offered the least expensive service.

Working with my banker in Smalltown USA,  I created two accounts, one at the online broker and the other at the bank. I placed $40,000 in each.

I set up the order for the country ETFs online, while my trust manager set up orders for the identical amounts of the same shares in his system.  Then we got on the phone, coordinated our timing and on a count of three each pushed the button “BUY”.

The results of this test  show how you can gain on any purchase of country ETFs.

In this special offer, you can get this online seminar FREE when you subscribe to our Personal investing Course.

Save $468.90 If You Act Now

Subscribe to the first year of The Personal investing Course (Pi).  The annual fee is $299, but to introduce you to this online, course that is based on real time investing, I am knocking $102 off the subscription.  Plus you receive FREE the $29.95 report “Three Currency Patterns for 50% Profits or More”, the $39.95 report “Silver Dip 2017” and our latest $297 online seminar for a total savings of $468.90.

ecuador-seminar

Triple Guarantee

Enroll in Pi.  Get the basic training, the 46 market value report, access to all the updates of the past two years, the two reports and the Value Investing Seminar right away. 

#1:  I guarantee you’ll learn ideas about investing that are unique and can reduce stress as they help you enhance your profits through slow, worry free, easy diversified investing.

If you are not totally happy, simply let me know.

#2:  I guarantee you can cancel your subscription within 60 days and I’ll refund your subscription fee in full, no questions asked.

#3:  You can keep the two reports and Value Investing Seminar as my thanks for trying.

You have nothing to lose except the fear.   You gain the ultimate form of financial security as you reduce risk and increase profit potential.

Subscribe to Pi now, get the 130 page basic training, the 120 page 46 market value analysis, access to over 100 previous Pifolio updates, the “Silver Dip 2017” and “Three Currency Patterns For 50% Profits or More” reports, and value investment seminar, plus begin receiving regular Pifolio updates throughout the year.

Subscribe to a Pi annual subscription for $197 and receive all the above.

Your subscription will be charged $299 a year from now, but you can cancel at any time.

Gary

 

Gary

(1) Dollar chart from pricedingold.com

(2) Grandfather Economic Report

 

Go to the final chapter in the “Investing in Water” Report – Click here.

See Kurota’s updated share chart on the US OTC market in US dollars

You can study Kurita’s website here


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