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Tap Into Water Stocks For July 21
Usually when the talk shifts to resources where demand outstrips supply, the focus is oil or precious metals, but there is another resource that is finding its way into these discussions - clean water.
Two-thirds of the Earth's surface is covered by water, but only a fraction of that is potable. While desalinization efforts may help satisfy some of the demand, increasing population and pollution has made water a very fragile and important resource. (Discover ways to invest in this scarce resource, check out Water: The Ultimate Commodity.)
Another factor to consider is the high cost to tap sub-surface water supplies, and to create the infrastructure necessary to transport it to remote areas. Unfortunately, this makes accessing and distributing water quite difficult for struggling economies. Companies that treat waste water are also important because they play a major role in keeping our environment clean and preventing transmittable diseases. Investors may get in on the demand for clean water by investing in this resource.
Water Stocks to Know
The following is a list of larger, better known public companies that provide water services or wastewater treatment:
Middlesex Water Company
New Jersey-based Middlesex Water Company provides services to 60,000 retail customers, the bulk of which are located in the central part of New Jersey, but also in Delaware. It is also under contract to municipalities in central New Jersey.
Good news has flowed from the company lately. In early May it reported first quarter net income of roughly $2 million which is a 13.3% increase on the $1.77 million it generated in the comparable period last year. On an EPS basis it earned 15 cents versus 13 cents per share in the same period last year. An increase in base rates and higher consumption were credited. In short, going forward I think demand will remain strong, largely because the company services a heavily populated area of the Northeast.
Drilling Deeper
There are more positives to be found beyond the earnings report. On May 7, the day after it released its first quarter numbers, Janney Montgomery Scott upped its rating on the shares to 'buy' from 'neutral'. If the company is able to be consistent, I think it could garner even more coverage.
Another positive is that Middlesex Water Company is being added to the Russell 2000. Its inclusion in this well-known index has the potential to raise the company's profile and again potentially help it garner attention from analysts as well as from institutional players/managers.
Analysts currently expect Middlesex Water Company to earn 95 cents per share this year and 99 cents per share in 2009. Finally, the stock pays a dividend. The current dividend yield is 4.1%, which I find attractive.
The downside is that this is a small company with just over $200 million in market capitalization. It largely focuses on one region and a lack of revenue diversification is never a great sign.
Bottom Line
The growing world population means that companies that process, deliver and/or transport water will always be in high demand. The stocks covered here are definitely worthy of follow up research for investors looking to capitalize on the attractive long term fundamentals that exist with water.
For further readings, check out Taking Global Macro Trends To The Bank.
Two-thirds of the Earth's surface is covered by water, but only a fraction of that is potable. While desalinization efforts may help satisfy some of the demand, increasing population and pollution has made water a very fragile and important resource. (Discover ways to invest in this scarce resource, check out Water: The Ultimate Commodity.)
Another factor to consider is the high cost to tap sub-surface water supplies, and to create the infrastructure necessary to transport it to remote areas. Unfortunately, this makes accessing and distributing water quite difficult for struggling economies. Companies that treat waste water are also important because they play a major role in keeping our environment clean and preventing transmittable diseases. Investors may get in on the demand for clean water by investing in this resource.
Water Stocks to Know
The following is a list of larger, better known public companies that provide water services or wastewater treatment:
|
Company |
Market Capitalization |
|
American States Water Company (NYSE:AWR) |
$580M |
|
Artesian Resources (Nasdaq:ARTNA) |
$125M |
|
Middlesex Water Company (Nasdaq:MSEX) |
$225M |
|
SouthWest Water Company (Nasdaq:SWWC) |
$236M |
|
The York Water Company (Nasdaq:YORW) |
$160M |
Middlesex Water Company
New Jersey-based Middlesex Water Company provides services to 60,000 retail customers, the bulk of which are located in the central part of New Jersey, but also in Delaware. It is also under contract to municipalities in central New Jersey.
Drilling Deeper
There are more positives to be found beyond the earnings report. On May 7, the day after it released its first quarter numbers, Janney Montgomery Scott upped its rating on the shares to 'buy' from 'neutral'. If the company is able to be consistent, I think it could garner even more coverage.
Another positive is that Middlesex Water Company is being added to the Russell 2000. Its inclusion in this well-known index has the potential to raise the company's profile and again potentially help it garner attention from analysts as well as from institutional players/managers.
Analysts currently expect Middlesex Water Company to earn 95 cents per share this year and 99 cents per share in 2009. Finally, the stock pays a dividend. The current dividend yield is 4.1%, which I find attractive.
The downside is that this is a small company with just over $200 million in market capitalization. It largely focuses on one region and a lack of revenue diversification is never a great sign.
Bottom Line
The growing world population means that companies that process, deliver and/or transport water will always be in high demand. The stocks covered here are definitely worthy of follow up research for investors looking to capitalize on the attractive long term fundamentals that exist with water.
For further readings, check out Taking Global Macro Trends To The Bank.
by
Glenn Curtis
Glenn Curtis started his career as an equity analyst at Cantone Research, a New Jersey-based regional brokerage firm. He has since worked as an equity analyst and a financial writer at a number of print/web publications and brokerage firms including Registered Representative Magazine, Advanced Trading Magazine, Worldlyinvestor.com, RealMoney.com, TheStreet.com and Prudential Securities. Curtis has also held Series 6,7,24 and 63 securities licenses.
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