The Late Oil Tycoon Was Also Heavily Invested in Water. He Likely Would Have Approved of These 2 Global Water Stocks.
The passing of T. Boone Pickens last week at 91 reminds us all of just what can be accomplished by those that bounce back from failure and look ahead for new opportunities.
When one thinks of Pickens, one thinks of oil, though he was active in many energy commodities and was a sharp stock speculator as well.
Oil has been at the heart of the global economy during the last century but in the 21st century, the price and supply of another scarce commodity will dominate the headlines. It’s a commodity so precious it is vital to everything we do from growing food to manufacturing.
Water. And water stocks are the way to play them.
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The Water Opportunity
While Americans take an inexpensive and steady supply of water as a birthright, in many countries of the world that’s anything but the case.
In Jakarta, Indonesia, more than 40% of its residents do not have running water. In many countries, the situation is much worse; 10% of all diseases are carried by impure water.
Water also plays a key role in global power politics.
Take Tibet, for example. The Qinghai-Tibet Plateau is the source of some 20 major rivers, and Tibet’s glaciers and lakes hold some 400 billion cubic meters of fresh water. Waters originating in Tibet supply around 30% of China’s fresh water.
Decades ago, I decided to get involved with a couple of entrepreneurial water companies. One used wave action off Galveston, Texas to create energy to pump fresh water to farming communities. The other was a deep-drilling technology company looking to find water locked in deep pockets of the earth’s crust in the Middle East.
Alas, neither of these gambits hit pay dirt, but my interest in investing in water has remained strong. The fundamentals seem unassailable.
- -World per capita water consumption is accelerating – up six fold in the last century with no end in sight.
- -The World Bank estimates that global water demand is doubling every 20 years.
- -The global population is growing at a rate of 200,000 people per day and expected to reach 9 billion by 2030.
- -Only 2% of the world’s water supply is fresh water, and rivers and lakes are draining fast.
- -Agricultural demand for water is skyrocketing.
- -Underground water levels are plummeting.
T. Boone Pickens saw the opportunity in water too. It’s why he became the largest individual water owner in America, with rights to an underground aquifer supplying 27% of all irrigation in the United States.
With this doomsday scenario and T. Boone Pickens leading the way, one would think that investing in water would be like shooting fish in a barrel.
Not so fast.
First, if you think oil is political, water is five times more so. Governments heavily subsidize water prices and like to keep tight control over water supplies.
Second, most water investment opportunities are boring, low-growth utilities and water treatment plants.
This means your water investment strategy must look first to higher growth emerging markets and, second, to breakthrough, game-changing water technologies.
Here are two water stocks sitting right on top of this megatrend.
2 Water Stocks with Global Growth
Water Stock #1: Companhia de Saneamento Basico do Estado de Sao Paulo (SBS)
This Brazilian stock is up over 100% during the last 12 months.
Majority owned by the state of Sao Paulo, Brazil, SBS provides water and sewage services to over 25 million people in 365 of the 645 municipalities in the State of Sao Paulo. Sao Paulo has a population over 40 million and represents 30% of Brazil’s total economic output.
In addition, the company is expanding to other regions in Brazil, and even into neighboring countries.
Water Stock #2: Energy Recovery Inc. (ERII)
This water stock idea is a more aggressive water technology play.
Turning saltwater into fresh water currently has two drawbacks. The infrastructure is expensive to build and the plants are very energy intensive to run. California-based Energy Recovery Inc. (ERII) tackles the energy issue by designing and developing energy recovery devices that help make desalination affordable by significantly reducing energy consumption.
The vast majority of ERII’s revenue comes from overseas markets, which is why it’s a potential recommendation for my Cabot Global Stocks Explorer advisory.
If you want to be bold like T. Boone Pickens and invest in our most precious commodity, water, these two water stocks are a good place to start.