WATER INVESTING

Water is undervalued and under increasing pressure due to an aging infrastructure, variable weather conditions, pollution and population increases. A desalination plant is under construction in Sydney and many are already used in the Middle East.

The water industry comprises companies providing products and services toward the collection, conveyance, treatment, and monitoring/analysis of water and wastewater for domestic, commercial, industrial, and agricultural uses.

A Long Term Theme

• There is no substitute for water and users cannot postpone purchases; price-inelastic demand.
• Conveyance and resource assets create a natural monopoly with huge barriers to entry.
• Demand is unaffected by inflation, recession, interest rates, changing preferences, or inventory loss.
• A history of strong and consistent growth under all market or economic conditions.
• Price of water does not yet reflect real economic value: Huge room/need exists for asset price expansion.

As an example, consider the situation in China. While representing 21% of the world's population, China possesses only 7% of the globe's renewable water resources. China's per capita water reserves are only about ¼ the global average. The UN has identified China as one of the 13 countries with the lowest water per capita in the world. What's worse is that the majority of the country's already limited freshwater supplies are heavily polluted. Of the 669 cities in the country, 440 suffer water shortages, and 110 of these cities are considered to have reached the critical level. Approximately 25% of China's population lacks access to safe drinking water and most of the country's cities have no centralized sewage treatment facilities. The Yangtze River is now a sickly version of its former self, absorbing nearly half of the country's wastewater, which is almost entirely untreated before it enters the river system. Rapid industrialization and urbanization is escalating the demand side of the equation, and it is easy to understand how intense the need is for water and wastewater infrastructure, both currently and into the future.

This article is not a substitute for full advice from a financial planner. Seek financial advice before making decisions about future and current investments.