Recent messages at this site have looked at the profit potential of investing in agriculture and food.
Multi currency investments in water may bring even greater returns.
Water shortages and drought represent an even greater change to the global economy than soaring oil and food prices.
The cost of water brought on by growing demand and reduced supply is already being focused on by multi national companies.
Scientists suggest that half of the world’s nations will face water shortages by 2025 and 75% by 2050.
Drought, of course goes hand in hand with rising prices for food.
Water shortages could cause social unrest. A billion of the world’s poorest people already drink unsafe water. Water shortages could create added energy shortages as nuclear power plants in Europe and the US could face shutdown because of a lack of cooling water.
The switch to bio fuels is an added draw on existing water supplies.
Population growth suggests a sizable problem of water shortages.
A cabinet office report predicted that by 2050 half of arable land in the world might no longer be suitable for production because of water shortages and climate change. By then the global population is expected to have grown by 50%.
Big problems create enormous opportunity.
Change and opportunity come in many unexpected ways. Water shortages for example formerly created a new demand for bottled water. Now water shortages have helped increase inflation and inflation is now cutting into the sale of bottled water.
Water wrapped in plastic is a luxury, not a necessity, it appears.
This is probably not bad, cutting back on the production of millions of plastic bottles. If we could also cut back on soft drink sales, the social savings would become astronomical.
Don’t count on less cola sales, but watch for it…just in case.
Also keep your eye on share investments in companies that make water filters.
Plus look at companies that are involved in water purifying technology.
This started me looking at companies in the water filtration business beginning with Brita.
Brita has been among the leading experts in the field of water filtration for home use since 1966 and the brand name is known in most households.
A search for Brita shares surprisingly led me to Clorox…the last company I would have thought to search for when thinking about good health and environmental safety.
Clorox bought Brita in 1988 as part of its recognition that sustainable products are no longer a tiny niche market. Clorox has an environmental sustainability division aimed at researching what motivates a consumer’s interest in the environment.
They recognized four growth trends: health and wellness, convenience, sustainability and the growing multicultural population, particularly the Hispanic population in the United States.
From their research, the Clorox mantra for sustainable consumers emerged in four sustainable areas:
Personal protection. What is the environments impact on me…goes on me…around me (and my family)?
Cost. How much money do I save by reusing or reducing consumption?
Status. I let others know that I care about the environment.
Altruism. I do it because it’s the right thing to do.
In addition to buying Brita Water Filters (focused on “What goes in me”), Clorox has also acquired Burt’s Bees Natural Personal Care Products (focused on “What goes on me”) and has started a Green Works Natural Cleaning Products line focused on “What goes on around me”).
The Green Works is Clorox’s first new brand in twenty years and offers at least 99 percent natural products made from coconuts and lemon oil. Green Works are formulated to be biodegradable and non-allergenic, packaged in recyclable bottles, and not tested on animals. The initial launch included five products: an all-purpose cleaner, a glass cleaner, a toilet bowl cleaner, a dilutable cleaner, and a bathroom cleaner.
The purchase of Brita was well timed as the world’s consumers changed drinking habits and shied away from drinking straight tap water.
However the growth in filters was not as high as expected. Demand for bottled water surged ahead instead.
Last year Clorox stated that it was giving its slow-growth businesses such as Brita a year or two to improve before deciding whether they are worth keeping.
The company’s CEO said: “Brita, the water filter and pitcher business, is ‘very profitable’, but sales have stagnated as convenience-focused consumers buy bottled water rather than filter tap water.
Brita has not stood still just waiting from growth to happen however.
Clorox jumped on the anti-plastic water bottle bandwagon by promoting Brita filters as sustainable alternatives to those bedeviled bottles (Clorox said, “Drink Responsibly”). Brita added eco-messages in their marketing approach. Their ads showed a plastic water bottle, while the words 30 minutes on a treadmill – Forever in a landfill.”
There is fundamental sense behind this marketing. Plastic bottles can take a thousand years to decompose. 60 million plastic bottles are thrown away each day in the U.S.
Brita has a potent message. One Brita filter cleanses the equivalent of water in 300 standard bottles.
Last year, Clorox, launched a marketing campaign with bottle maker Nalgene focused around the phrase “Filter for Good.” The appeal is to reduce bottled-water waste by investing in a reusable Nalgene bottle and drinking tap water filtered with Clorox’s Brita products. The ads suggest that Americans could reduce production of 38 billion water bottles a year and save 1.5 million barrels of oil used in production of the bottles.
Let’s take a look at our share purchase filter to see if Clorox shares might make sense.
The tests we use are:
Fundamental Economic Drivers:
Good Market Valuation:
Good PE & Other Valuations:
Has captured Market’s Attention:
Fits My Personal Position:
In short we look for shares of well managed companies that are selling at a fair value with growth potential and that have a record of rising earnings and rising share prices in a good value stock market.
+ Good Management:
Clorox has been in business since 1913 as a stable company. Rising commodity costs are currently cutting into Clorox’s margins, but there is plenty of price elasticity in its products so it should be possible for the company to pass on some of the burden.
+ Fundamental Economic Drivers: The growing global population’s focus on materialism has created pressure on the world’s water supply. This has created great water pollution. Clorox has a basic product (Clorox) that helps resolve the immediate concerns of bacterial water contamination…but with contra indications (drinking Clorox is not good).
Brita offers a solution to this secondary problem.
+ Rising Earnings: Clorox has a solid history of consistency in earnings and dividend growth. Earnings have grown at an average compounded rate of about 10% over the past five years. During the same period, dividends paid have grown by just over 12% average per annum. The company’s latest dividend increase was by 29%. Implementing cost controls as well as getting past the restructuring costs associated with the Burt’s Bees acquisition should put Clorox in a position to continue to grow earnings as the Burt’s Bees and the Green Works line pan out.
– Good Value Stock Market. Keppler’s Major Market Value Analysis ranks Austria , Canada, Denmark, Hong Kong, Singapore, Switzerland and the U.S.A as poor value (sell) candidates so Clorox shares traded as CLX on the New York Stock Exchange is not traded in a good value market.
+ Good PE & Other Valuations: Clorox has a current P/E of 16.61 which is near, a 10-year low.
The current Price to Sales is 1.57 near, a 10-year low.
The current Clorox dividend yield of 2.8% is near a 10-year high.
Inflation and recession has helped consumer staple stocks as they are seen as havens. Stocks such as McDonalds (MCD), Colgate-Palmolive (CL), and Procter & Gamble have risen. Clorox has not.
– Has captured Market’s Attention: CLX shares are not in favor. They rose from $42 in August 2003 to $62 in August 2005. Since that high point they have slowly drifted down to $56 as of June 26, 2008.
On the solid base of its brands, strong marketing and innovation, and a weak U.S. dollar, CLX should excel domestically and internationally. This is a rare opportunity to get a household name, and a great dividend growth company on the cheap.
The four positives and two negatives suggest that Clorox shares may be a good buy but they are not ready for a fast rise yet. If the shares fit your personal wants, needs and desires; then this is a share worth considering or watching…especially if the price begins to rise.
There are some negative comments going over the internet about Clorox and Brita right now.
One major wave of emails are asking Brita to start a recycling program for the Brita filters.
Other green proponents worry about a company that apparently creates a problem and then also solves it. One green website wrote:
“It’s the capitalist system in microcosm. Brita isn’t just better water. Brita is a better way for Clorox to do business. Clorox manufactures the problem. Clorox makes us pay to produce the problem. Clorox help us identify the problem. Clorox tells us that there’s a solution. Clorox manufactures the solution. Clorox does everything possible to make us become addicted to this solution. And Clorox makes us pay over and over again for this solution to a problem for which it is also responsible.”
Yet Clorox and chorine are not the initial problem. The biggest problems are too many people using and contaminating water. This creates bacterial pollution which is a number one priority because bacterial infections can kill quickly. Thirst can also kill fast.
Yes, water with chlorine is bad…but better than no potable water.
Let’s be aware of these facts and the potential that bacteria brings to Clorox and that Clorox brings to Brita.
I am a leading proponent of green investing but also can see how owning shares in Clorox can be good for the environment and yet offer stable profits as well
Next message looks at other big companies that are investing in water purification.
Until then, may all your water be clean.
Learn more about multi currency investing in water about our next International Investing and Business Course in North Carolina.
Learn more about multi currency investing in water at International Investing and Business Made EZ Ecuador.