Filed Under:
Tickers in this Article: HOO, CTWS, CWCO, SJW, VE
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. (To 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 select list of public companies that provide water services or wastewater treatment:

Company
Market Cap
Cascal N.V.
(NYSE:HOO)
$336M
Connecticut Water Service
(Nasdaq:CTWS)
$214M
Consolidated Water
(Nasdaq:CWCO)
$285M
SJW Corp.
(NYSE:SJW)
$479M
Veolia Environment
(NYSE:VE)
$23.6B
Data as of market close July 29, 2008

Connecticut Water Service
Connecticut Water Service is a holding company that provides water service to almost 300,000 people in, you guessed it, Connecticut. It was organized in the mid 1950s, and incorporated in 1974, but the roots of the company start before the civil war. In other words folks, although most people haven't heard of the company, it's been around for a while, and it is well known in the region in which it operates. Going forward, its recognition will only increase in this highly desirable region of the country.

Connecticut Water Service is coming off a solid first quarter. The company earned about $1.7 million, or 20 cents per share, in the quarter ended March 31. That's a decent jump over the roughly $1.5 million, or 18 cents per share, it turned in during the comparable period last year. That is about a penny north of Wall Street expectations according to Yahoo Finance data .

Another thing that piques my interest is that the company was recently added to the Russell 3000. This should help draw more retail and institutional interest, which in turn, will drive the share price higher.

What To Expect
Going forward I think the company will be a relatively steady producer. At present Wall Street expects Connecticut Water Service to earn $1.20 per share this year and $1.25 per share next year. Over the next five years, analysts are expecting the company to grow at a 15% pace per year. That's attractive, given that the shares are currently trading for about $25.

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.

comments powered by Disqus

Trading Center