One Small Stock About to Make One Big Move
Here's How You Could Double Your Money in 2020 with This Growing Company
I’ve been working in the finance industry in one way or another for most of my adult life. I’ve worked at the biggest investment banks and consulted for the smallest startups. And over the course of my career, I’ve met quite a few people.
From startup founders to Fortune 500 executives, my “rolodex” has gotten pretty full over the years. And from time to time, one of those friends I made along the way brings me an incredible investment opportunity.
They’re typically established companies with a solid, albeit short, track record of growing sales. And most of them look like they’re shoe-ins for a pretty big profit.
A few months ago, just that happened. One of my friends introduced me to a new company. And after months of research and countless interviews with officers, I’ve decided that it fits right into this bucket.
It’s got an established revenue stream. It’s growing like crazy. And it’s nearly guaranteed to double in value over the next year or two. So I decided to put together a special report on the opportunity.
I’ve already released the report to my investing community — the members of The Wealth Advisory. But this opportunity is just too good for us to keep to ourselves. So we’ve chosen to share it with you today.
Just keep reading to learn all about what the company does, what it’s already accomplished, and why I’m so sure it’s poised to double or even triple in value by 2021...
One Small Stock That’s About to Make One Big Move
Earlier this year, I started working with a new group of investors. These are individuals who invest millions of dollars into just one opportunity, if it looks profitable. And they’ve got a very successful track record.
I’m talking about guys who funded companies like True Religion (bought out for $835 million, over 3,100% above its IPO price), guys who helped launch the still-private but very profitable data company Palantir, guys who are currently working that same magic on another company that’s already public but still completely off the radar for rank-and-file investors.
And that company is the focus of this report. It’s experienced double-digit sales growth every year it’s been in existence. It’s led by a team of experienced professionals. And it’s currently the fastest-growing brand in its niche industry.
It’s called The Alkaline Water Company (NASDAQ: WTER). And it’s poised to deliver shrewd investors 100% to 200% gains in the next 12 months...
A decade ago, it sounded crazy to say people would pay for water. But anyone who was able to get over the idea of people paying for something that’s essentially free stood to make a substantial profit.
Rapper and entertainer Curtis Jackson (a.k.a. 50 Cent) made the lion’s share of his net worth from bottled water. Instead of taking cash for his endorsement of the product, he took equity in the company. And when it was bought by Coca-Cola a few years later, he cashed out $100 million.
But that’s just one story from one company. The bottled water business has grown from literally nothing to a massive $19 billion-a-year industry. Last year alone, nearly 14 billion gallons of bottled water were sold to consumers. That’s enough to fill more than 20,000 Olympic-sized swimming pools.
And analysts estimate that number is only going to grow. By 2023, they’re predicting the market will expand another 30% to be worth nearly $25 billion a year.
But with a growing industry comes increased competition. So the companies providing this hydration are constantly trying to evolve and set themselves apart from their peers. A lot of that was accomplished by branding and packaging in the past. Because, I mean, how different can two bottles of water really be?
But recently, a new wave of innovation is hitting the water cooler. And just like bottled water so many years ago, it’s creating its own niche market in the beverage world.
It’s called alkaline water. It’s one of the latest developments to change the face of bottled water. And it’s projected to grow to an $18.24 billion industry of its own by 2025.
But before I get into the company and the market, let’s just make sure we all know what the product is...
Think back to high school chemistry class. Do you remember the pH scale? Acids and alkalis? I’m sure you’ve at least got a vague recollection. But in case it’s a little foggy, I’ll give you the extremely basic explanation (if you want more details, you’ll need to ask my parents — they’re the scientists):
The pH scale is a set of numbers used to determine whether a substance is more acidic (like lemon juice or vinegar) or alkaline (like milk or coconut water). If a substance falls below seven on the scale, it’s more acidic. If it falls above seven, it’s alkaline.
Plain water typically sits at seven — neither acidic nor alkaline.
So alkaline water, as the name suggests, is a beverage that has a pH greater than seven.
Proponents claim many benefits associated with drinking alkaline water such as helping to fight cancer, preventing the development of diabetes, boosting the immune system, etc.
Opponents claim there is little research to back up those claims. I’m not really concerned either way — as long as it’s not making anyone sick and I can make a profit.
So there’s the short-story version of what alkaline water itself is and why people want to pay to drink it.
Now, let’s get into the company and the incredible opportunity it presents us as investors.
Jumping in with Both Feet
The Alkaline Water Company started as an idea back in 2012. The founder and current CEO, Richard Wright (Ricky to his friends), started the company, as he likes to say, back when the word “alkaline” was only associated with the Energizer bunny.
And in just six years, Ricky has led AWC to become the 10th largest enhanced water brand in the U.S. through its double-digit sales growth every year on record.
Ricky and I have a similar background. He worked for one of the “Big Four” accounting firms. I worked for one of the “Big Three” investment banks. He actually even had an office at my bank for a while during one of our bigger audits.
So we know each other at least tangentially pretty far back. What can I say? Wall Street is a surprisingly small world.
And I know that Ricky is a stickler for details thanks to his accounting background. But I also know he has an eye for the future and an uncanny knack to look at a problem and see an opportunity instead.
That’s what’s led him to success throughout his career. And it’s what led him to start The Alkaline Water Company as well.
But when Ricky had the idea, he needed money to implement it. I mean, he was putting up his own, but you need a lot to really hit the ground running the way Ricky tends to do.
So he reached out to another person I’ve known of for a while. He’s one of the venture capitalists that helped launch True Religion. I didn’t know him personally back then, but I made sure to meet him after seeing the success he had with that firm.
The two of them got together with some other investors and launched AWC’s flagship product, Alkaline 88. And since that launch back in 2013, the company has grown its flagship to be one of the best-selling waters in the country.
Word of Mouth
You can imagine my surprise when one of my friends called me to ask if I’d like to meet the CEO of this up-and-coming bottled water company, and it turned out to be Ricky.
And you can imagine his surprise when he mentioned some of the initial investors and I was able to rattle off the other companies they’d helped launch and shoot out a text message to one of them.
But none of that even compares to my surprise upon really investigating the company and seeing so much value being completely ignored by investors.
You see, the company has been growing by leaps and bounds for the past six years. But it’s done most of that without really spending a lot on advertising. Its products have become the fastest-growing brand in the U.S. mostly through word of mouth.
That’s great for the company. It means more money for research and development on new products. It means more capex for expansion into new regions. And it means there’s a very easy step to take to get growth to accelerate even more.
But it also means people are really only seeing the name on store shelves and in their refrigerators. So they’re not thinking about it all the time. They’re not looking it up on Yahoo! Finance to see if it’s publicly traded like Coca-Cola, Monster, or Pepsi.
That’s kept the number of investors looking to buy WTER shares low. And that’s kept the price pretty low, too.
But that’s all about to change...
Exponential Return on Investment
The Alkaline Water Company has been stepping up marketing spending recently. And in the chart below, you can see the effect it’s having on revenues:
What you’re seeing there is that for every dollar the company spends on marketing, it takes in several dollars in new sales. That means we’re seeing AWC hit scale.
That tells us future marketing efforts are likely to see exponential returns in the form of new revenue, as every penny that goes into advertising now yields more than a dollar in extra cash flow.
And the timing is absolutely perfect for the major catalyst the company just publicized...
Mergers and AQUA-sitions
Just a few weeks ago, my friends at AWC made a major announcement: The company would be acquiring one of its rivals to combine forces.
But it wasn’t just any rival. It was literally the perfect mate for AWC. Where AWC was strong, this company was weak. And what AWC needed to improve, this company already had down pat.
And the combined company is going to be a force to be reckoned with by competitors and a stock that’ll be adored by investors.
You see, the company AWC is buying — AQUAhydrate — was founded by celebrity investor, workout lover, and hamburger aficionado Mark Wahlberg. And his co-investor is a pretty big name, too...
You may know him as Sean. Or Puffy. Or Diddy. Or Puff Daddy. Whatever you call him, Sean Combs is another world-renown celebrity. And he’s soon to be a major shareholder of AWC, along with Mark Wahlberg.
The duo brings a stable of celebrities and Instagram influencers with them including fitness fanatic Jillian Michaels. Between the three of them — Jillian, Mark, and Sean — they’ve got over 65 million social media followers.
Their company has the marketing and advertising side of the equation down. But it’s not big enough to get the kind of production and distribution arrangements Ricky and the AWC crew already have set up.
Another benefit of the merger is that AQUAhydrate has a solid presence in convenience stores. It’s got products in over 10,000 convenience stores. AWC has been building out its cooler space through contracts with distributors. But its major retail spot is grocery stores.
Between the two companies, they’ve got products in over 75,000 stores nationwide:
And since the two companies go after different demographics — AQUAhydrate focuses on health and fitness enthusiasts while AWC focuses on health-conscious families — there shouldn’t be any competition between the company’s various brands.
It’s really a marriage made in heaven. And it’s going to propel the combined company’s stock to massive gains.
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Undervalued, Underappreciated, and Underpriced
The Alkaline Water Company already has an incredible record of growth over its short history. Management has managed to grow sales every single quarter the company has reported earnings.
It’s averaged 72% a year revenue growth since 2017. And in 2016, AWC increased sales five times over.
Its average quarterly growth is 54%. And it’s on track to hit those numbers in the coming quarter as well.
As of the most recent quarter, management predicts the company will have full-year sales between $45 and $50 million. That would be a 43% to 55% jump from 2019 sales figures.
But that’s not the most impressive part. Those numbers are just for AWC. They’re not counting the $15 million in annual sales AQUAhydrate brought in over the past two years.
Even if that line just holds even, we’re going to be looking at a company raking in as much as $65 million next year.
Compared to the billions in sales operations like Coca-Cola do, that may not sound like much. But when you consider the fact that The Alkaline Water Company’s market cap is currently under $50 million, it starts to seem a whole lot bigger.
You read that right. WTER stock is trading for less than what its 2020 sales will be. That’s a big disconnect. And when it resets, that’s going to bring shares up between 100% and 500% from where they are today.
You see, the rest of the beverage industry trades at much higher multiples to sales.
Coca-Cola sells for 6.3 times annual sales. Keurig Dr Pepper sells for 3.7 times sales. Danone sells for about two times its revenue estimates.
If WTER were to trade at its peer valuations, we’re talking about shares doubling, quadrupling, or even growing six times over.
Maybe the market doesn’t think AWC can really hit those sales targets. Maybe it thinks the company is too small to be valued the same as bigger brands.
But if that’s the case, the market is wrong. And it’s going to regret underestimating AWC’s potential.
Because the bottom line is that investors willing to speculate on this small company stand to see their investments balloon as the rest of the world finds out about Alkaline88, AQUAhydrate, and the rest of the AWC line of products.
And speaking of products, there’s a whole new line about to hit shelves early in 2020...
Coming Soon to a Theater Kroger Near You
The growth of the functional water market is impressive enough. But AWC has some other tricks up its sleeve to drive sales even higher in the coming years.
Earlier in 2019, the company debuted its new line of flavored alkaline water. It’s 100% natural. It has zero added sugar. And it’s already driving up sales.
The company expects the flavored line to make up 25% to 30% of its sales this year. But as good as the flavored water sales have been and are expected to be, flavors aren’t the biggest catalyst management sees driving sales astronomically higher.
The biggest of them is without a doubt hemp and CBD-infused products. Thanks to the U.S. Farm Bill passed in 2018, hemp is no longer considered a controlled dangerous substance (CDS) by the federal government like heroin, cocaine, and methamphetamine.
And that means it can now be grown legally and transported across state lines. And that’s creating a huge opportunity for businesses in all sorts of industries.
AWC had been working on a line of CBD-infused products already. And with the announcement of the 2018 Farm Bill passing, it was ready to debut the lines.
But the FDA is taking its time passing regulations on hemp-derived CBD. So AWC is using its hemp and CBD connections to put out a line of topicals while it waits for guidance on ingestible products.
Starting early in 2020, you’ll be able to get a whole line of Alkaline88 CBD products at your local store:
It’s a bit of a departure from beverages. But the move makes sense when you think about it...
All of the places where Alkaline Water Company’s products are sold also sell things like body lotions, lip balms, and hand creams. And the company already set up a contract with suppliers of the purest CBD extracts and growers of the best hemp plants for the infused water.
Plus, with its new stable of celebrity investors and spokesmodels, Alkaline88 (and the other brands) will be trusted and well-known for their quality.
And once the FDA moves to properly regulate hemp-derived CBD, all AWC has to do is flip a switch, and its CBD-infused beverage line will be in all the stores where you’ve been finding its topicals.
And we’re not just talking about a couple of flavored waters, either. I mean a whole line including energy, recovery, relaxation, and sleep-aid shots; powder packs you can mix into a beverage of your choice; tincture drops so you can get a strong dose without drinking a gallon of water; and even capsules filled with the purest CBD extract on earth:
By the close of 2020, Alkaline Water Company will go from a small operation with only a couple of products to one of the biggest functional beverage companies in the world.
That kind of growth won’t go unnoticed by the big players like Coca-Cola, PepsiCo, and Nestle.
And just to give you an idea of how much one of those bigger players might value adding AWC to its portfolio, I’ll tell you about another company: Core Water.
For a few years, Core Water was just another bottled water brand. But after introducing a couple of flavors, its sales doubled. And once it hit around $80 million in annual sales, it was bought out by Keurig Dr Pepper for $525 million.
That’s a price-to-sales premium of 6.5625. And it’s a pretty good comparison for AWC, which is looking at $65 million in sales for 2020. A buyout at a similar multiple would fetch around $427 million.
And that would be a 780% increase from where the market is valuing the company as I write this report.
Now, that would be an incredible deal for investors. But it’s more of a best-case scenario. Well, best-case scenario is really if AWC stays independent and trades up to a 6.5 P/S ratio. But getting bought out at one would be a close second.
What’s more likely is that we see revenues continue to grow and the market starts to properly value the shares as they get more publicity. That should then lead to a P/S in the 2 to 3 range. And that’s a double or a triple for investors who buy in now.
There’s no reason The Alkaline Water Company’s stock should be trading below $2. There’s little reason for it to be below $3. But right now, it’s trading around $1. And based on its historic growth and its current trajectory, it should be trading for closer to $4 or $5.
I can see shares doubling in value by the end of 2020. And if the company isn’t bought by a bigger player by then, shares are likely to head higher until they’re trading at a valuation more in line with those of peers like Coke and Pepsi.
Speculative investors who set up a position now will have the potential to cash out triple-digit gains before all is said and done.
See You Next Year
There you have it. A special gift from me and The Wealth Advisory community to start the New Year off strong.
And if you’re interested in learning more about some of the other life-changing investments we’ve uncovered at The Wealth Advisory, click here for a report on our latest income-generating, profit-boosting stock.
I hope your holidays were warm and your New Year’s celebrations are safe. Now, I’m off to celebrate my birthday with a round of Top Golf, some greasy food, good friends, and a few adult beverages.
Enjoy what’s left of the holiday season. I’ll see you when we all get back in 2020.
To your wealth,
After graduating Cum Laude in finance and economics, Jason analyzed complex projects and budgets for the U.S. Army. Then, at Morgan Stanley, he led the assistants' team for the North American repo sales desk, responsible for hundreds of multibillion-dollar trades every day. Jason is the assistant editor for The Wealth Advisory income stock newsletter. He also contributes regularly to Wealth Daily. To learn more about Jason, click here.
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