Investing in Water: The Most Profitable Investment of the 21st Century
by Louis Basenese, Advisory Panelist, Investment U
Wednesday, August 9, 2006: Issue #569
Editor’s Note: Investment U Advisory Panelist and IPO expert Louis Basenese constantly monitors the world’s fastest-growing industries. Below, Louis details the fundamental forces at work driving one of today’s hottest growth opportunities…
Right now, there’s one commodity that sells at gas stations for almost twice the price of gasoline – and U.S. consumers never complain about it.
In fact, this precious resource we often take for granted is in critical shortage in more than 80 countries worldwide. And it will forever be in high demand, as every living being’s survival depends on it.
Of course, the commodity I’m talking about is water. And the effects of its shortage are of major concern…
Nearly 40% of the world’s population does not have access to clean water. And this problem is not going away anytime soon. It’s actually getting worse…
Less than 2% of the world’s water store is fresh water – to quench the thirst of 6 billion people. And according to the International Food Policy Research Institute, by 2020, an additional 2 billion people will be competing for this shrinking resource.
But the problem isn’t 14 years from now; the problem is now. Below, we’ll review why investing in water is turning out to be the most profitable investment of the 21st century. But first, let’s look at the problem…
At this moment, clean, safe water is scarce across the globe. Fortunately, several players in the private sector are working hard to solve this problem. And for investors, this industry provides perhaps the most profitable opportunities of the 21st century.
Two Catalysts: Global Warming And Population Growth
Water is the single-largest health problem in the entire world. According to SIWI.org, 90% of the 5,000 daily child deaths are related to some sort of diarrhea-related disease.
And torrid population growth is not only stressing water use, it’s causing massive pollution and depleting the largest aquifers on the planet. Unstable politics of water-poor communities, states and countries is triggering heated tensions – and in some cases, all-out wars. And global warming is drying up lakes, eroding shorelines and depleting rivers.
Consider the following:
- Within 50 years, more than half of the global population will be living with water shortages. They will affect 4 billion people by 2050.
- The Dead Sea has dropped more than 66 feet in the past 100 years and is now losing about 3 feet each year.
- Lake Chad in Africa is now 1/20 the size it was 35 years ago.
- Water-borne diseases kill one child every 8 seconds.
According to the National Academy of Sciences, Mother Earth is now the hottest it’s been for at least 400 years.
More specifically, over the last 100 years the surface temperature of the Earth has risen 1 degree Fahrenheit. And while that doesn’t sound like too much, it’s enough to wreak havoc on eco-systems, erode shorelines, dry aquifers and cause massive water shortages all over the world.
According to the IPCC, if global warming is not stopped, the earth could heat up another 3 to 10 degrees Fahrenheit by the end of this century. Time magazine points out that, “Mount Kilimanjaro has lost 75% of its ice cap” Moreover, it could completely lose ALL of its ice by 2020.
The result is less inland snow, a reduced amount of fresh river water, drying aquifers, and intense strain on any ecosystem relying on irrigation. With entire regions becoming unsuitable for crop production, both food and water will need to be transported into the water-deprived nations, dramatically hindering their ability to contribute to world GDP.
And the world’s fast-growing population isn’t helping the situation
From the beginning of time through the middle of the 1900s, the global population grew at a steady – but not alarming – rate. Now, it’s multiplying exponentially.
There are just over 6.1 billion people on the planet right now, but by 2050, census officials predict there could be as many as 9 billion people on Earth. And more demand for water simply means that the already under-supplied resource will become scarcer in the years to come.
The World Bank points out that global demand for water is doubling every 21 years. And, at present, 1 billion people on the planet don’t have access to safe water. “In Latin America alone, about 15% of the population – roughly 76 million people – lack safe water, and 116 million don’t have access to sanitation services.”
So how do we solve this water crisis?
Opportunity in Water Investing Is “Dripping” From This Shortage
The answer lies in the private sector – companies working night and day to solve the world’s water woes. The global water industry has been heating up for several decades, and the story’s certainly not new.
Many savvy investors have already recognized that investing in water stocks is simply the investment of a lifetime. Some have already locked in huge profits over the past few years. Here are just a few examples of water investment successes:
- Investors who put $10,000 dollars in Consolidated Water (Nasdaq: CWCO) in 2000 banked a cool $71,061.43 by February of 2006.
- Water has to be moved, as well and the lucky few who invested $10,000 in the IPO of American Commercial Lines (Nasdaq: ACLI) in the early part of 2005 would have made more than 310% by May of 2006.
And these profits are just the beginning of what could be the greatest investment of the 21st century.
Think of it this way: Bottled water sells for roughly $1.50 a liter at the gas station right now, while gasoline sells for around $3 a gallon. With 3.78 liters in a gallon, bottled water would be selling for $5.67 a gallon – almost twice the price of gasoline. And water companies don’t have to build expensive oil wells and refining plants that are toxic and environmentally unfriendly. The overall cost to bring water to market is, in many cases, lower.
In the end, investing in water stocks is a smart play all around for those seeking constant, stable returns. Global Summit Management (SGM) reports that from 2000 to 2005, water utility stocks returned 134.57%, while the S&P 500 clocked in at a mere 2.74%.
And those who invested in water stocks for a 10-year period were even happier. The stocks banked 446.01% from 1995 to 2005, versus 9.06% in the S&P.
Conclusion on Water
The world needs safe, clean drinking water and acceptable sanitation levels. Demand is outstripping supply. And several smart companies are solving the problem, which bodes well for investing in water for long-term gains.