As reporters well know, the best stories often hide in plain sight, slowly building over months or even years until, inevitably, something spectacular happens that catapults a story onto the front page.
When the big bang finally occurs, it often sets off a big sector stock rally, which is why investors should have paid very close attention to a story out of Canada posted two weeks ago by the wildly-popular web site The Drudge Report.
If this had happened in the U.S. instead of Canada, chances are we would now be talking in the past tense about the rally in water infrastructure stocks. As it is, this old reporter’s instinct says America’s water woes are now just one catastrophic incident away from leading the evening news and generating a giant sector rally – thus making now the right time for investors to be thinking about accumulating shares in one or more water ETFs and/or engineering firms that focus on water.
The story Drudge posted, reported by Canadian Broadcasting Corp., was headlined: “Lake forms in downtown Montreal after 118-year-old pipe bursts.” When, as would seem inevitable given the decrepit state of the U.S.’s own water infrastructure, the next headline is about New York (or Chicago, Cleveland, Detroit, etc., etc.), Drudge and every other popular news outlet will have a very juicy story about America’s water infrastructure crisis. Expect this story to build and build as all the regularly-occurring mini-crises that now fly just below the national media’s radar screen provide an excuse to keep emotions running high. (The same week downtown Montreal turned into a lake, in Pennsylvania the Beaver County Times ran a story headlined: “As staggering costs delay sewer upgrades, Ohio River deluged with pollution.”)
Add in how the Obama administration has made rebuilding America’s infrastructure a top priority and you’ve got a story that could dominate discussion on Wall Street as well as Main Street.
Right now, Wall Street doesn’t pay nearly as much attention to water-related stocks as it should; however, investors have at least a couple of funds they can research, as well as a number of engineering firms, any or all of which could see a sharp rise in share value in the wake of a spike in media interest in the nation’s water woes.
The first is NASDAQ-traded PFW Water Fund (PFWAX), run by long-time manager Neil Berlant. Citing growing infrastructure concerns, Berlant recently said that despite the broad market’s sharp downturn, for his sector times “are the best they have been since I began my focus in the mid-1980s.” (See This Portfolio Manager is Adding to Positions, Says Prospects for His Industry Best Ever Despite Crisis)
The second is the Calvert Global Water Fund (CFWAX). This fund, launched last November by the socially-responsible investment concern, targets water infrastructure and technology-related companies. Its stated goal is to profit from the generally-accepted proposition that the freshwater crisis in the U.S. and around the world is going to require an investment of as much as $1 trillion in infrastructure and sanitation systems between now and 2030. (See Calvert’s Explanation for Why It Launched Its Water Fund Should Be Required Reading for All Investors)
For investors interested more in a natural resources fund where water is one of a number of sub-sectors, the PowerShares Global Clean Energy Portfolio (NYSEARCA:PBD) is worth a closer look. This fund is based on renowned cleantech analyst Josh Landess’s Wilderhill New Energy Global Innovation Index. (See In 10 Years Josh Landess Will Be Clean Energy’s Warren Buffett. Investors Should Get to Know His Research Now)
Beyond these are some well-established engineering firms that could be at the head of the line when that $1 trillion is earmarked for specific projects. They include Big Board-traded Ameron International Corp. (NYSE:AMN), a broad-based infrastructure firm doing a lot of water-related business, and Northwest Pipe Co. (NASDAQ:NWPX), which makes high-pressure steel systems primarily for drinking water.
Two other potential winners, neither of whom gets much of a look-see on Wall Street, are The Gorman-Rupp Co. (NYSEMKT:GRC) and Mueller Industries Inc. (NYSE:MLI) The former, whose shares trade on AMEX under the symbol GRC, is into pumps and other flow-control equipment for both water and heating systems, while the latter, which trades on the Big Board under the symbol MLI, does tubes, fittings, valves, etc. for the water and other industries.
Disclosure: no positions