Signup for our free newsletter:

The Water Sector

Written By Nick Hodge

Posted December 31, 2008

Get this:

In trading earlier this week, several water companies got off to a great start. Midway through trading on Monday, Northwest Pipe (NASDAQ: NWPX), Layne Christensen (NASDAQ: LAYN), Gorman Rupp (AMEX: GRC), and Badger Meter (NYSE: BMI) were all showing sizable chunks of green.

Yet other water industry stalwarts, like Consolidated Water (NASDAQ: CWCO), Met Pro (NSYE: MPR), and Southwest Water (NASDAQ: SWWC) were getting hammered—down 10% or more.

This goes to illustrate the wacky way in which the market continues to move. Usually, an entire sector moves in one direction, but with nagging credit limitations and an ongoing recession, traditional rules no longer apply.

It takes a little more research and guidance to come away with profitable long positions in this market. Simply knowing a sector is bullish—like water in this case—is no longer enough to profit from it.

Indications of a Water Bull

The evidence is all around.

A Google News search for the term ‘water’ generally reveals numerous stories on why the water industry needs so much financial attention.

Here are some headlines from a similar search I conducted earlier in the week:

  • More Cracks Found in Burst Maryland Water Main

  • EPA says coal ash spill dumped metals in water

  • Tampa Region Likely To See More Water Restrictions

  • Water line breaks at Wash. police department

  • Birmingham to increase water prices

Hundreds of headlines like that are repeated daily. Those mentioned above were just the top results from a one-day search. Even so, those five headlines paint a perfect picture of why the water industry is ripe for investment.

  1. Water infrastructure is crumbling

  2. Pollution is threating water sources

  3. Water scarcity is rampant

  4. Price is going up to offset reduced supply and increased demand

What more could you ask for as an investor? The water sector is calling out to us.

Make it Rain Profits

If there is anything else you could ask for, it’s probably direct government investment in the water sector. Well ask, and you shall receive.

Congress, along with President-elect Obama and his cabinet, is currently drafting a new economic stimulus with a reported price tag over $850 billion.

Of that sum, $300 billion will be earmarked for infrastructure investments, with a focus on electric and water infrastructure.

That should serve to make the horns on this water bull just a bit longer.

But as I said, simply knowing a sector is about to take off—even with government backing—isn’t enough to profit from it.

Consider the following example:

Consolidated Water (NASDAQ: CWCO) is a major water utility with desalination operations in the Caribbean. It’s a long-time investor favorite, and a likely candidate to prosper from the water bull.

Insituform (NASDAQ: INSU), is a lesser-known pipe rehabilitation company, and also a potential play in the water sector.

In early October, Consolidated Water was trading around $17.00. Insituform went for about $15.00.

Today, Consolidated Water goes for about $11.30 while Insituform has soared to $19.40. Here’s the chart, with the Dow thrown in for good measure:

water stocks

The DOW is down nearly 40%. Consolidated Water took a 60% hit. But Insituform is up over 20%, over the past six months, and I think it’s headed higher.

That’s why I recommended purchasing shares of Insituform to thousands of readers of my Alternative Energy Speculator. They’re enjoying all the upside the water market has to offer without the downside, because they get thoroughly researched recommendations delivered directly to their inbox.

And we’re sitting on three other water plays that are about to take off, with plenty more to come.

Truth is, I think 2009 is going to be a very lucrative year for water stocks. And if that’s the case, my readers are in for some serious profits.

Not to brag, but here are some of the returns my water index offered in 2008:

  • Tetra Tech (NASDAQ: TTEK), 65%

  • Lindsay Corp. (NYSE: LNN), 302%

  • Calgon Carbon Corp. (NYSE: CCC), 273%

  • Flowserve Corp. (NYSE: FLS), 185%

And that was during a year we’d all like to forget.

But a new day is emerging, and I have the insight and research to deliver winner after winner (like I’ve been doing) in the water market.

That’s why I want you to come along. And I want you do it at a discount.

You see, 2009 is going to be a blockbuster year for water infrastructure and clean energy stocks. The profits will be rampant, but with a growing sector and hundreds of companies to cover, more research and traveling is now needed to secure legendary gains for my readers.

That’s why, after nearly a year, I’m forced to raise the retail rate of the popular Alternative Energy Speculator to $499.

But today, as a special year-end discount and in anticipation of the money that will be made in 2009, I’m offering a one-time discount price of $149.

This will be your last chance to purchase the Speculator at a rate below retail, and you’ll also get my new book, Investing in Renewable Energy, absolutely free. So come along for all the profits the next year has to offer.

Call it like you see it,

nick hodge