Investing in Water

One aspect of investing that some people consider when they decide where they put there money is helping mankind. That could be in the form of a simple donation or investing with companies that help mankind develop. One area that needs investment that will forever be necessary is water transportation and desalination. Water scarcity is one of the largest risks to economies around the world, as populations continue to grow and glaciers and fresh water sources continue to diminish. I visited Lake mead less than two months ago and it currently sits at the lowest level since Hoover dam filled up this artificial lake in the 1930’s, its clear to me that civilizations across the world cannot continue to rely on traditional reservoirs and a certain amount of precipitation to divert emergency. As we have done with oil infrastructure, the same will eventually have to be done with water – desalination and purification of ocean water and pumping that water across lands to irrigate and placate populations.

The biggest players in that type of game can definitely change if the need escalates, but currently we have a list of the following companies who are related to supplying water infrastructure or desalination services:

  • General Electric (GE)
  • Ecolab (ECL)
  • American Water Works (AWK)
  • Watts Water Technologies (WTS)

This is a short list, but in summary General Electric has worked on desalination plants and will definitely be a player to come in this field. Ecolab is involved in water purification technologies. America Water Works is more of a utility company that provides water service and waste water treatment (another vital component of sustainable water infrastructure). Watts Water technology helps provide water quality solutions – in layman’s terms it creates plumbing pieces that help buildings smoothly move water around. Feel free to view each company’s website for more details.

These types of investments can be a form of macro trend investing – investing in technology which is up and coming and required for a sustainable future. As folks have witnessed in recent history investments into coal and dirty energy have proved very unprofitable, and that is based on standards governments have been setting which have resulted in fewer coal powerplants and slower growth in the demand for crude oil as car efficiency goes up and electric car sales increase. Water is a resource that everyone needs – which can be conserved but will need more supply soon!


The Stock Market Vs a Chess Game

The stock market is in some ways much like a chess game – prices of stocks usually are priced based on future expectations. In other words the folks at multi-billion dollar hedge funds have done the math, and have tried to play a long ways into the future. This can be said about the price of stocks, and the price of stock derivatives. The biggest reason why the stock market has been falling in recent weeks is due to the expectation that the Federal Reserve is going to raise interest rates – a low jobless claim rate cause stocks to sink faster because it increases the chances that the Federal Reserve will in fact raise rates to stave off inflation. By doing so, stocks are no longer as good of an investment relatively speaking compared to cash – stocks have risk and cash has little risk, so to increase interest rates means you can get more return for a no risk investment.

However, since the stock market looks to the future there is a very real possibility that stocks will have taken into account a Federal Reserve interest rate increase before the increase happens – and if the increase is lower than expected you should see the stock market start to jump back up due to its factoring error.

That being said, investors should still reassess the forward price earnings ratios of their stocks to make sure they aren’t holding on to something that is too expensive. Speculators will still hold onto company stocks which they see as having lots of potential even though they are priced very high. You can see that in companies like Tesla, where a company that doesn’t have a P/E ratio because it isn’t profitable yet still boasts a good stock price. On the other hand, a company like AFLAC has a very low P/E ratio of 10 because I suppose investors don’t see AFLAC coming up with the new invention of the century. Apple is priced at a moderately cheap price of around 15, as investors are weary that Apple may have had its day in the sun and won’t come out with any new revolutionary products since legend Steve Jobs has left.

My suggestion then is to sell off your expensive stocks and as the market drops incrementally buy back in as prices because attractive. As an insurance policy against the Federal Reserve deciding not to raise interest rates I suggest buying some precious metal company stock, and companies that will do well under higher interest rates include banks such as Bank of America. I want you to be the one who yells Checkmate before your portfolio yells it to you!

Please make sure to read my disclaimer below before taking any action.