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I've been highlighting some stocks of late that will get a boost from the very sad, drought like conditions out West. Cadiz Inc. (NASDAQ:CDZI) is one such pick.

A water resource management company, Cadiz owns 46,000 acres throughout Southern California and provides water services to this region. In its vast acreage, it taps and stores groundwater, conserves irrigation water, and provides desert agriculture -- landscaping that uses less irrigation than normal plantings. It is also also developing technologies for water conservation, reclamation, production and conveyance.

Cadiz's growth model is predicated on the growing population of Southern California coupled with the dwindling water resources. This is not a problem that will be going away, unfortunately. This means profit for Cadiz. I think this is a strong company that is going to get stronger as the dry, hot conditions in the U.S. West persist. It has a lock on the land, which means it has the access to the water. Water will be the new gold of this dry region.

The key to Cadiz's future is "The Cadiz Groundwater Storage & Dry-Year Supply Program." According to the company's website, this program was originally structured as a partnership between Cadiz and the Metropolitan Water District of Southern California. The Cadiz Program was designed "to provide increased reliability of supply and flexibility in operation of Metropolitan's Colorado River Aqueduct without risk to any of the environmental resources of the eastern Mojave Desert."

In August of 2002, following five years of comprehensive environmental and technical analysis, the U.S. Department of the Interior issued a strong endorsement of the Cadiz program, which was narrowly defeated. Cadiz still owns the water assets of the program -- which include about 35,000 acres in the area surrounding the San Bernardino Valley. My bet is that Cadiz will one day form a joint venture to supply water to expansive areas of Southern California and this will transform Cadiz's earnings stream and value.

Type of Stock: A player in the water resource management field, serving the growing population base in Southern California, where water is becoming an increasingly precious commodity.

Price Target: At $22.98, I think this is a buy and hold. We could see Cadiz into the $30's by year's end especially if the company signs major new contracts to supply water.

CDZI 1-yr chart:

CDZI

Source: Cadiz: Wet Gold For Your Portfolio