Invest in 'Blue Gold' with Watts Water Technology

Includes: FLS, WTS
by: Bruce Vanderveen

Families showering together may offend some sensibilities. However, the April, 2009 issue of National Geographic Magazine has a photo (legs only, sorry) of a family doing just that. Not only do they shower together, they do it standing in flat plastic containers to catch the soapy run off. The run off is then used to water the garden. This is one of many measures promoted by the state of South Australia to conserve water in the drought stricken area. Water is so precious every last drop is reused as often as possible.

Often called Blue Gold, water is the ultimate commodity. Why? Simple, without it, for ourselves and our crops, we die. Life cannot exist without water. Yet, we often take clean water for granted. We waste it and dump toxins in it. In an increasingly crowded world that has to change.

Watts Water (NYSE:WTS), a $780 million cap company has been around since 1874 and supplies water control systems in North America, Europe and China. The company has been in China since 1994 but saw Chinese revenue decrease in 2008 due to currency, tax, wage and transportation issues.

The company website is The site provides access to SEC filings, annual reports from 2001, dividend and stock data, press releases, webcasts and other company information.

WTS manufactures valves and related products which insure water quality, conservation and control. Recent focus has been on valves which prevent water back-flow. Back-flow controls prevent dirty water from contaminating clean supplies.

Smartmoney magazine discusses how Watts Water may benefit from the US $789 billion stimulus plan. See article here. Competitors include Flowserve Corp (NYSE:FLS) and some private firms.

Watts had negative publicity last month as it cut jobs but increased executive compensation see article here. Also, there are some litigation issues which have dragged on for several years (see the 2008 annual report).

Watts has a PE of 13.7, price/sales ratio of .53 and a well covered 2.1% dividend. There have been 22 years of consecutive dividend payments. Recent market rallies show WTS participating strongly.

China is suffering major water quality problems while President Obama’s stimulus programs will benefit water infrastructure products in the US. In a world increasingly needing clean water WTS seems to have a solid future.

This seems to be a solid, long established company. Recent problems in China, litigation and perhaps ill timed layoffs and executive compensation issues may warrant caution, however.

Disclosure: Long WTS

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