By Matthew Brown November 8, 2010
http://www.fool.com/investing/general/2010/11/08/the-james-bond-investor-water.aspx
I love James Bond. I also love that the film series has generated some investment ideas, which may seem odd if you think I'm talking about a tricked-out Aston Martin that fires missiles. I'm not.
In fact, the villain in Quantum of Solace offers a Foolish investment strategy in plain English. One of his goals is to control Bolivia's water supply. That's when it hit me: The villain goes to such great lengths to control fresh water because it's just like oil – the world doesn't have an endless supply. There are secular movements afoot that could restrict water supply going forward, such as population growth, with some estimates putting annual increases at 57 million.
So it occurred to me that I could become a super-villain super-investor if I could figure out how to profit from a world where water might become scarce.
Muuu-wahahahahaaha!
Rubbing my hands together, I hunted for desalination providers. Consolidated Water Company (Nasdaq: CWCO) caught my eye. It produces desalinized water for Cayman Islands, the Bahamas, Belize, the British Virgin Islands, and Bermuda. Analysts project five-year earnings growth of 20%, the company produces modest free cash flow, and has $25 million of net cash. The company also feels confident enough in its business to pay out a 2.9% dividend.
On the larger side, a French company called Veolia (NYSE: VE) also makes sense. They are more diversified, also operating in Environmental and Energy Services as well as Transportation. They partnered with IDE Technologies Ltd., an Israeli company, built the world's largest desalination plant in Israel. Makes sense putting one in a desert region, no? Thanks to an aggressive efficiency plan, Veolia's financials are increasingly solid, the company shows a profit, and has strong free cash flow. Plus it merits a full five-star rating in Motley Fool CAPS.
As Fools know, sometimes it pays to invest in the companies that provide the nuts and bolts for other businesses. Somebody has to provide the technology for desalination plants to work, so that's why Energy Recovery (Nasdaq: ERII) is potable. The company "serves engineering, procurement, and construction firms, which design and build desalination plants, as well as original equipment manufacturers that supply equipment and packaged solutions for small to medium-sized desalination plants." Energy Recovery is still small, and its profits have been erratic, but free cash flow is at $5 million in 2009, and the company has over $55 million in cash and virtually no debt.
Purification technology is another big milestone for liquid-driven villains. Calgon Carbon Corporation (NYSE: CCC) goes beyond purifying water. They also purify and deodorize air, food, and other beverages. Analysts project nearly 23% compounded earnings growth over the next five years, the company has a net cash position, and over $30 million in 2009 free cash flow.
Even villains must diversify
For those not ready to make the pure-play leap into super-villainy, there are more diversified alternatives. Heck, even General Electric (NYSE: GE) is into desalination, along with purification and wastewater infrastructure. PowerShares Global Water (NYSE: PIO) and Guggenheim S&P Global Water (NYSE: CGW) are ETFs that invest in a variety of water-related companies.
The takeaway is that there are plenty of ways to take advantage of water scarcity. Small-cap loving Fools can find opportunity in this sector, while more conservative investors can scoop up diversified plays. If pressed, I'd personally go for Calgon. Purification of multiple liquids for consumption is built-in diversification, and I like the financials.
Of course, Fools should engage all the resources of Her Majesty's Secret Service when investigating companies with complex technologies like these. A lack of due diligence can derail even the most evil of plans.
Recent CWCO News
- US Stock Futures Stable in Pre-Market On Path for Consecutive Quarterly Gains, Oil Prices Rise • IH Market News • 03/28/2024 11:42:00 AM
- Consolidated Water Reports 2023 Revenue up 92% to $180.2 Million, Net Income of $30.7 Million or $1.93 per Diluted Share • GlobeNewswire Inc. • 03/27/2024 09:50:31 PM
- Consolidated Water Sets 2023 Full Year Operating Results Conference Call for Thursday, March 28, 2024 at 11:00 a.m. ET • GlobeNewswire Inc. • 03/19/2024 12:31:00 PM
- Consolidated Water Declares Second Quarter Cash Dividend • GlobeNewswire Inc. • 02/27/2024 01:31:00 PM
- Consolidated Water to Attend the 36th Annual ROTH Conference, March 17-19, 2024 • GlobeNewswire Inc. • 02/22/2024 01:31:00 PM
- Form SC 13G/A - Statement of acquisition of beneficial ownership by individuals: [Amend] • Edgar (US Regulatory) • 02/14/2024 06:44:18 PM
- Form S-8 - Securities to be offered to employees in employee benefit plans • Edgar (US Regulatory) • 01/12/2024 09:10:37 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 01/04/2024 09:15:50 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 01/04/2024 09:15:47 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 01/04/2024 09:15:34 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 01/04/2024 09:15:29 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 01/04/2024 09:15:25 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 01/04/2024 09:15:24 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 01/04/2024 09:15:15 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 12/14/2023 09:30:32 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 12/14/2023 09:30:29 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 12/14/2023 09:30:20 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 12/14/2023 09:30:20 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 12/14/2023 09:30:11 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 12/14/2023 09:30:11 PM
- Consolidated Water Declares First Quarter Cash Dividend • GlobeNewswire Inc. • 11/28/2023 01:31:00 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 11/09/2023 09:55:15 PM
- Consolidated Water Reports Third Quarter 2023 Revenue up 99% to $49.9 Million and Net Income of $8.6 Million or $0.54 per Diluted Share • GlobeNewswire Inc. • 11/09/2023 09:32:49 PM
- Form 10-Q - Quarterly report [Sections 13 or 15(d)] • Edgar (US Regulatory) • 11/09/2023 09:20:40 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 11/07/2023 09:15:13 PM
VPR Brands LP Reports Record Annual Financial Performance for Fiscal Year 2023 • VPRB • Apr 19, 2024 11:24 AM
Coinllectibles' Subsidiary, Grand Town Development Limited, Acquires Rare Song Dynasty Ceramics Worth Over USD28million • COSG • Apr 18, 2024 8:03 AM
ILUS Provides Form 10-K Filing Update • ILUS • Apr 17, 2024 9:54 AM
Glucotrack Announces Expansion of Its Continuous Glucose Monitoring Technology to Epidural Glucose Monitoring • GCTK • Apr 17, 2024 8:00 AM
Maybacks Global Entertainment To Fire Up 24 New Stations in Louisiana • AHRO • Apr 16, 2024 1:30 PM
Cannabix Technologies Begins Certification of Contactless Alcohol Breathalyzer, Re-Brands product series to Breath Logix • BLOZF • Apr 16, 2024 8:52 AM