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Joseph L. Shaefer
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Joseph L. Shaefer is the CEO and Chief Investment Officer of Stanford Wealth Management, LLC, a Registered Investment Advisor. Retired senior executive of Charles Schwab and Co. Retired (36 years) active and reserve military service -- six in special operations, the next 30 in the intelligence... More
My company:
Stanford Wealth Management LLC
My blog:
The Investor's Edge
My book:
Bringing Home the Gold
  • Not a Drop to Drink: Water ETFs and Funds to the Rescue 1 comment
    Oct 22, 2009 10:48 PM | about stocks: PIO, PHO, FIW, AMN, TTEK, FLS, VMI, LNN, NLC, TMO, WTS, PNR, AWK, ITRI, ROP, DHR, ITT, IEX

     

    I have written about the coming likely shortage of cool, clean water for many nations (including some of those touted as “owners” of the coming century) here and in follow-on articles.  I also recommended specific companies in those articles that I believe will benefit from these shortages.


    I’ll go further and speculate that the next horrific war, and the one the United States would be wise not to meddle in, may well be between two superpowers, China and Russia.  Here is the amount of Internal Renewable Water Resources (IRWR) that China has per capita: just 2,173 cubic meters IRWR per person.   Russia, on the other hand, with 1/5th the population (and declining), has 30,001 cubic meters IRWR per person, nearly 15 times that of China. 

    Nations may squabble over oil or gold or rare earth elements or some other commodity, but when it comes to water, there’s no squabbling, no protracted negotiation, no choice.  It is: get the water or die.  As I wrote once before, “All that fresh, clean water in Siberia has to look pretty good to China, a nation that, relative to its population, didn’t have much to begin with and has soiled, sullied, dirtied, and polluted what little remains.”

    If China is in bad shape for potable water – hence their land grab of Tibet from which most of their still-clean water now flows – imagine India’s possible plight, with just 1,211 cubic meters IRWR per person, barely enough to sustain new life after taking into account agriculture, industrial uses, and survival consumption.

    Now contrast China at 2173 and India at 1211 with, say, those two allegedly “over the hill” has-beens, the USA and Canada.  The U.S. has nearly 10,000 cubic meters IRWR per person, and Canada weighs in with an amazing 91,000.  Water is needed for tertiary oil extraction, to squeeze gas from shale, to cool solar water towers, to keep agricultural products growing, and for scores of other, otherwise economically untenable projects.

    In nations like ours where water is readily and cheaply available, we take it so much for granted that we barely notice it.  Yet in terms of dollars devoted to providing that water, which industry is larger, the Internet or water treatment, transportation, delivery, and recycling?   I believe the answer is water.  How about education and water?  Water.  Health care or water?  Water.  Worldwide, this is big business.

    In addition to the companies mentioned as I did my best to make the case for investing in water in those previous articles, I thought I’d offer up a few possibilities for those readers who prefer to gain diversification by investing in ETFs and mutual funds.  For your further research and analysis, may I suggest the following as a starting point:

    Two ETFs are the grand-daddies in this business, PowerShares Global Water (NYSEARCA:PIO) and PowerShares Water Resources (NYSEARCA:PHO) – if you can consider 2 years old a granddaddy!  PIO is up about 50% this year and PHO about 20%.  But their long-term moves may be just beginning.  Yet another ETF in this space is First Trust ISE Water (NYSEARCA:FIW), up a hair less than PHO but a bit newer, as well. 

    In addition to these three ETFs, you may also want to consider some open-end (traditional) mutual funds.  Among those dedicated to investing in the various facets of water are:

    ·         Allianz RCM Global Water (MUTF:AWTAX) – LOAD FUND!!!

    ·         Calvert Global Water (MUTF:CFWAX) -- LOAD FUND!!!

    ·         Kinetics Water Infrastructure (MUTF:KWINX)

    ·         Sustainable Water (SMWNX)

    Please note the first two are load funds.  I don’t personally buy load funds.  I figure I am paying enough in expenses to the mutual fund company so they can provide corner offices, company cars, bonuses for beating the S&P by 1/1000 of a percent, and other perks to their own executives.  I don’t need to also pay 4 or 5% to some broker to sell me the fund, as well.  But there may be those who don’t feel as strongly as I do on this issue.

    Current water usage and future water demand doesn’t depend upon the actions of governments or the lining up of planetary bodies.  The investment case is simple: if population increases, water usage increases.  If more water is contaminated, more water has to be cleaned.  If there are more mouths to feed, more stuff must be grown – demanding more water. 

    If I had to hazard a guess, I’d say we’ve already reached a tipping point in water, albeit one that may only be obvious in hindsight.  Whatever the world’s GDP growth is going forward, whether 3% or 8%, I’ll hazard a guess that water companies in the aggregate will average a good 2 ½% to 4% higher.

    Water investments are not for the tip of your investing pyramid where you place higher-risk holdings looking to hit it over the fence.  They are for the foundation of your pyramid where you place Basic, Boring, Dull and Profitable companies and funds to provide stability in good markets and bad.

     

    Among the more commonly-held companies owned by many of the seven funds above are Ameron International (NYSE:AMN), Tetra Tech (NASDAQ:TTEK), Flowserve (NYSE:FLS), Kemira Oyj, Hyflux (OTCPK:HYFXF), Arcadis NV (OTC:ARCVF), Valmont Industries (NYSE:VMI), Suez Environnement (OTCPK:SZEVF), Lindsay Manufacturing Co (NYSE:LNN), Veolia Environnement (OTC:VEOEF), Nalco (NYSE:NLC), Thermo Fisher Scientific (NYSE:TMO), Watts Water Technologies (NYSE:WTS), Pentair Inc (NYSE:PNR),  American Water Works (NYSE:AWK), Itron Inc. (NASDAQ:ITRI), Roper Industries (NYSE:ROP),  Danaher (NYSE:DHR), ITT Corp (NYSE:ITT), United Utilities Group (OTC:UUGWF), and IDEX Corp (NYSE:IEX).

     

    Full Disclosure: Long PIO, TTEK, HYFXF, and LNN.

    The Fine Print: As Registered Investment Advisors, we see it as our responsibility to advise the following: We do not know your personal financial situation, so the information contained in this communiqué represents the opinions of the staff of Stanford Wealth Management, and should not be construed as personalized investment advice.

    Also, past performance is no guarantee of future results, rather an obvious statement if you review the records of many alleged gurus, but important nonetheless –our Investors Edge ® Growth and Value Portfolio has beaten the S&P 500 for 10 years running but there is no guarantee that we will continue to do so.

    It should not be assumed that investing in any securities we are investing in will always be profitable. We take our research seriously, we do our best to get it right, and we “eat our own cooking,” but we could be wrong, hence our full disclosure as to whether we own or are buying the investments we write about.

     

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    Joe,

     

    Please give me a call to discuss. 610-727-6828
    1 Dec 2009, 05:35 PM Reply Like
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