Some analysts are making the case that it’s time to look outside the U.S. at stocks in non-U.S...
Water, Water Isn’t Everywhere
10/18/2010 11:58 am EST
I spent part of this past week at a fascinating conference in Montreal, focused on a precious global resource. No, it wasn’t gold. And it wasn’t oil. It was all about a resource that threatens to become even scarcer and thus have a more devastating economic impact: Water.
In America, we mostly take water for granted. Like air, we expect it to be clean and immediately available at no measurable cost. But the rest of the world doesn’t have such a cavalier attitude toward water.
In fact, the head of the Nature Conservancy estimates that 4,000 children die every day around the world from lack of available clean water and from the concurrent lack of sanitary facilities. That’s nearly 1.5 million a year.
That was a shocking way to start the conference. One billion people on our planet do not have safe drinking water. But even where there is water—think of the recent monsoons and floods in Southeast Asia—the issue is cleanliness. It’s shocking to realize that 40% of the world’s population lacks basic sanitation.
In the past two years, the global issues of water usage, delivery, collection, and preservation have become corporate imperatives. And it is clearly more than a “do-good” public relations effort.
For example, companies like Coca-Cola (NYSE: KO) gave presentations on the importance of long-term planning for water resources, a key product ingredient, in the countries where they bottle their beverages.
Wal-Mart Stores (NYSE: WMT) built stores in Brazil that reduced their water consumption by 40% through the use of different building materials and by pressuring suppliers to become more green in the products they deliver. They have undertaken an in-store campaign to make their customers more aware of water issues.
IBM (NYSE: IBM) has created a division, Big Green Innovation, as part of their Smarter Planet initiative, to help companies create metrics for measuring their use of water and other resources. If you haven’t heard the term “Green Sigma,” you soon will.
Companies in diverse areas such as manufacturing, oil drilling, agriculture, and drug manufacturing have been dedicating resources to the global water issue. Water security becomes food security, which becomes national security. But instead of fighting over water, the world so far is aligning to make better use of the water we have.
This interest in water as a critical resource has created many investment opportunities. Several years ago I purchased shares in a “water ETF—Powershares Water Resources (NYSEArca: PHO), which is still trading around my purchase price at about $17 a share, but well above its lows for the year around $7 a share, when I forgot to buy more!
Similarly, there is Powershares Global Water ETF (NYSEArca: PIO) as a way to play this industry, and the Claymore S&P Global Water Index (NYSEArca: CGW). All are below their pre-2008 crash highs, but well off their lows.
There are also plenty of individual companies involved in water testing and filtration, such as Danaher (NYSE: DHR) and Calgon Carbon (NYSE: CCC). Many companies function in emerging markets, which are just developing infrastructure for both drinking- and waste-water systems. But domestic water infrastructure might be the beneficiary of upcoming government-stimulus programs—if we ever see one of those again!So, next time you buy a bottle of water—or take that extra-long shower—you might be more interested in hedging your bets with an investment in the future of water.
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