Small-cap water companies – the daily reckoning gasbuddy nj


Listen up. This could easily prove to be the most important Penny Sleuth alert I write to you for the next year — possibly longer. Two massive profit opportunities are developing right now. Both trends are early in the profit cycle. So you still have time to get in on the action. But I wouldn’t wait too long.

At a recent closed-door Agora Financial editorial meeting, Chris Mayer (the editor of the successful Capital & Crisis) and Eric Fry (editor of Rude Awakening) couldn’t stop talking about two of the Earth’s most precious commodities. And no, they are NOT gold and oil.

There are more than 6.5 billion people living on Earth today. That’s approximately four times as many as at the start of the 20th century. And the United Nations predicts that number will swell to over 10 billion by 2100. Whether you are born in Africa, Asia or the good ole US of A, one thing is certain: Everyone needs water to survive. Problem is, 97% of Earth’s water isn’t suitable for drinking.

As Chris pointed out in Capital & Crisis, “While water largely covers this hardscrabble little planet of ours, less than 3% of it is fresh water. And the presence of pollution and disease has made much of that water undrinkable. Unlike with oil, no amount of technological wizardry can replace water.”

It doesn’t take a genius to realize that as demand for water increases (thanks to a rise in the population) and supply either remains flat or decreases (no one is “making” more water), the price will rise. And it’s that simple but spot-on logic that prompted Dan Denning of Strategic Investment to dub water one of the top investment ideas for 2006.

To prove just how valuable water already is, Dan wrote, “In mid-December, the premiers of Quebec and Ontario, along with the governors of eight U.S. states, signed a pact that will ban all large-scale water diversions from the Great Lakes basin. That will prevent fully 20% of the total fresh surface water of the Earth being exported by pipeline to thirsty states like California, Arizona or Nevada. The eight states that border the Great Lakes — Illinois, Indiana, Michigan, Minnesota, New York, Ohio, Pennsylvania and Wisconsin — have seen the future. future. And the future is that fresh surface water is going to be more and more valuable as it gets more and more scarce.”

2) Southwest Water Company ( SWWC:NASDAQ), market cap of $333.4 million. SWWC’s services include water production, treatment and distribution; wastewater collection and treatment; utility billing and collection; utility infrastructure construction management; and public works services.

4) Franklin Electric Co. ( FELE:NASDAQ), market cap of $1 billion. FELE designs, manufactures and distributes groundwater and fuel pumping systems, electronic controls and related parts and equipment. It manufactures submersible water and fueling systems motors used to pump fresh water.

5) Watts Water Technologies, Inc. ( WTS:NYSE), market cap of $1.0 billion. As MSN Money reports, WTS “is a global manufacturer of safety and flow control products for residential and commercial plumbing, heating and water quality markets. The company’s product lines include backflow preventers for preventing contamination of potable water caused by reverse flow within water supply lines and fire protection systems…”

8 ) Consolidated Water Company ( CWCO:NASDAQ), market cap of $266.2 million. CWCO uses reverse osmosis technology to produce fresh water from seawater. It supplies water to customers in the Cayman Islands, Belize, Barbados, the British Virgin Islands and the Bahamas.

Barron’s has reported, “Importing nations may have little choice but to pay higher prices for sugar in the first half of 2006, after whittling down inventories in recent years…World 2005-06 sugar consumption should surpass output by 1.5-2 million tons after Brazil’s disappointing center-south harvest, the International Sugar Organization said in early January.”

This recent sugar high has been sweet for investors. And no one was on this trend earlier than my buddy Chris Mayer. Last year, Chris recommended his Capital & Crisis readers add shares of small-cap Imperial Sugar Company (IPSU:NASDAQ) to their portfolios. At the time, Imperial (which has been in business for over 160 years) was trading for less than its tangible assets. It had $4 per share in cash. And it traded for $11.44.

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“… Hauser sounds more like a missionary than a traditional hotelier, with remarks like, ‘You can’t help being fascinated [by the sea] and you start caring about all the associated issues. Humans consist of 80% water, the Earth consists of 80% water; without water, there is no life’ …”

“… For instance, polyphenolics are natural antioxidants produced by berries and corn. In plants, they help fight off pests. In our diet, they help prevent age-related decay, such as heart disease. Research at the University of California, Davis, recently found that organic berries and corn have up to 58% more of these precious substances …”

“… The United States Geological Survey recently released a report on volatile organic compounds (VOCs) in the country’s ground water and drinking water. And while VOCs were not detected in many of the nearly 3,500 wells sampled in the study, ‘VOCs were detected in most aquifers throughout the Nation, and were not limited to a few specific aquifers or regions’ …”

“… Reverse osmosis, for example, relies on a wonderful membrane that removes salt from water, thereby allowing it to be processed like lake water. It’s good at purifying water so it becomes drinkable. However, the membranes tend to get clogged, and the energy requirement is a staggering 35-50% of the total system cost …”

“… Here’s a short refresher: One out of five people in the world are without access to safe drinking water and half of the world’s population lacks adequate water purification systems. On top of this, the United States’ aging infrastructure will need a $1 trillion overhaul over the next 20 years …”