Access to fresh, clean water is a major investment opportunity of the 21st century. Water is currently a $600 billion market that is poised to grow to $1 trillion in a few short years — by 2020. asserts Tony Daltorio, editor of Investors Alley The Market Cap.
The problem isn’t just a water scarcity problem, but also an infrastructure problem. Globally, the problem is massive, with the World Bank estimating infrastructure spending needs to triple to $114 billion annually. And that is not counting the operating and maintenance costs.
Back here at home, the 2017 report card from the American Society of Civil Engineers (ASCE) gave our wastewater infrastructure a grade of D+ and our drinking water infrastructure a grade of D.
Overall, the ASCE says there is a more than $2 trillion funding gap between the projected current funding and the $4.59 trillion needed to get U.S. infrastructure up to an overall B grade by 2025. That is music to the ears of our selection for investing in water – Xylem (XYL).
This water technology company was spun off from ITT Corporation (ITT) in 2011. Its reach is truly global, generating revenues ($4.5 billion in 2016) in over 150 countries.
The U.S. accounted for 46% of revenues, Western Europe for another 27% of revenues, the fast-growing emerging market segment now accounts for 20% of revenues and the rest of the world filled in the remaining 7%. In China, the company experienced a 19% rise in orders last year.
The primary customers in its water infrastructure segment are public utilities and large industrial companies. These customers use Xylem products including industrial pumps, filtration and treatment equipment, and infrastructure control systems.
Its Applied Water business focuses more on the distribution of water to households and businesses. And the third segment of Xylem’s business is Sensus. It represents the company’s largest foray into the smart technology market. Sensus is all about technology and includes a variety of smart meters, cloud-based analytics software, remote monitoring and data management systems, and smart lighting.
Tucked into this business is another 2016 acquisition — the Singapore-based water analytics company Visenti. This firm provides a suite of advanced products and services to enable smart management of water networks.
The logic of the Sensus and Visenti acquisitions is impeccable. Xylem’s smart platform can quickly identify the leaks in a water utility’s creaking water system. Then Xylem can offer its services (pipe fusion, etc.) to fix whatever the problem is.
With all the world’s water problems, I see an extended period of robust growth for Xylem, which is so uniquely positioned to meet many of the world’s water woes. Therefore, I recommend you purchase Xylem at a price up to $75 a share.
