Water Investing Profits as We Adapt

by | Aug 1, 2014 | Archives

We can gain water investing profits as we adapt.  There is plenty of adapting to do.  This means plenty of profits.

One area of adaptation we have been sharing since before our website began is water.

little horse creek

Little Horse Creek running though our farm.

We have nearly a mile of bold creek on our farm as well as dozens of springs.  All of our water supply here is gravity fed spring water off the land.

We started writing about investing in water nearly two decades ago and looking for land with an endless supply of fresh water, which we found at Little Horse Creek.

The New York Times article  “Sunken Kingdom Re-emerges” (1) tells how rising sea lines swallowed parts of Wales this year but also revealed a dense forest of prehistoric tree stumps in the submerged forest of Borth.

This forest was flooded 5,000 years ago by rising sea levels after the last ice age.  Ancient footprints were found there, the oldest known outside Africa.

At that time the sea level was 400 feet lower and one could walk from Yorkshire to Denmark. Then temperatures warmed sharply, by eight to 10 degrees Fahrenheit.  The coastline rose rapidly wiping out many settlements.

The main theme of the article is: “The big lesson is, we have to adapt. Whether we like it or not, the climate will change — it always has — and today we are accelerating that change.”

This is especially true when thinking about water in our modern era.   Water is so vital to food, energy and life.

There are three direct ways to invest in water: utilities; infrastructure companies that make pipes, pumps and other capital equipment; and treatment companies that make filters, chemicals and other products.

Then there are peripheral opportunities.

A  Wall Street Journal article (2) on California’s three-year drought shows how the water shortage there is highlighting the problem and reveals many investing and business ideas as it spreads from agriculture to lawns and backyards, where fines for excess water use are growing.  Businesses such as golf courses and lawn care are seeing revenue dry up due to water restrictions.

Replacing grass with drought-tolerant landscaping is a booming area of opportunity.   Landscape contractors who replace lawns with native plants are thriving while golf courses and lawn care are seeing a bust.

Smart water meters are a fast-growing business.

Agriculture irrigation systems. Since almost 70% of all fresh water use is irrigation such as for growing corn and wheat, there is growth in the business of newer more water-efficient irrigating equipment.

Water rights.  Companies with water rights prosper as water rates rise.   Companies that have extensive farmland with water rights are likely to do well.

If you have experience in any of these fields, an investment makes sense.

One well positioned, easy water investment is the ETF PowerShares Global Water ETF (symbol PIO).

water etf

Charts from www.finance.yahoo.com.  Click on image to enlarge.

Shares with a rising price and rising earnings tend to offer the best value and PIO certainly has both right now having risen 44% in the last two years.

However a look at its price since 2007 shows there is plenty of room to grow.  This water ETF has not yet recovered all of its loss from the 2007 market crash.

water etf

The shares are still down 5.17% since 2007 while the Dow Jones Industrial Index is up 24.6%.

DJI etf

This ETF invests at least 90% in shares to get a similar return as the NASDAQ OMX Global Water Index.  The fund invests in the securities of companies listed on a global exchange that create products designed to conserve and purify water for homes, businesses and industries that comprise the index, as well as American depositary receipts and global depositary receipts that are based on the securities in the underlying index.

See the components of the NASDAQ OMX Global Water Index below (3)

We all have to adapt. Whether we like it or not, the climate will change. This has always been true and modern society is  accelerating that change.  Merri and I have been adapting our business, lifestyle and investments for the past thirty plus years and one of the big shifts we have made is increasing our holdings of water.

east-lake

Our back yard at our Florida home.

rosaspamba

Ecuador shaman at one of the numerous water falls on our Ecuadorian Hacienda, Rosaspamba.

Gary

Join us the October for the leaf change in Canada and learn about investing in water.

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(1)  New York Times A Sunken Kingdom Re-emerges

(2) online.wsj.com California cities crack down on water use amid drought

(3)  NASDAQ OMX Global Water Index

The list above for the NADAQ OMX Global Water Index was effective as of 2012.

In June 2013, following eight securities were added to the Index: Beijing Enterprises Water Group Ltd. (371 HK), China Water Industry Group Ltd. (1129 HK), Ebara Jitsugyo Co Ltd. (6328 JP), HanKore Environment Tech Group Ltd. (BIOT SP), Cia de Saneamento de Minas Gerais-COPASA (CSMG3 BZ), Lindsay Corporation (NYSE:LNN), Roper Industries, Inc. (NYSE:ROP) and Aqua America, Inc. (NYSE:WTR).

In June 2013 he following three securities will be removed from the Index: GLV Inc. (GLV/A CN), The Toro Company (NYSE:TTC) and Watts Water Technologies, Inc. (NYSE:WTS).

In June 2104 the following two securities will be added to the Index: SIIC Environment Holdings Ltd. (SP:SIIC) and The Toro Company (NYSE:TTC)

In June 2014 the following two securities will be removed from the Index: Ebara Jitsugyo Co Ltd. (JP:6328) and Aqua America, Inc. (NYSE:WTR).

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