Water, Water Everywhere: Profitable Rivers
Posted Wednesday, August 04, 1999 at 09:02 AM EST
by Joseph Shaefer
The Investor's Edge
Can you find an industry that is selling at 10-15 times earnings, has already seen the start of a takeover wave and provides one of the products we need most to live? It's the water industry. There truly is 'water, water, everywhere.' However, the quality is inconsistent. Indeed, here at Lake Tahoe, I live near the purest water in the country. Nevertheless, I travel a lot and my heart goes out to much of America, where the water is foul-tasting and foul-smelling.
And, let us assure you, our water is a thousand times better than the water in Asia, Africa, Latin America, and much of Europe. How about the guys that treat, filter, process, clean, purify, and recycle the water all around us? We're recommending a few companies we think will do particularly well for you for the very long term. Indeed, there's profit in the rivers, wells, creeks, stream, and lakes. Of these, we would suggest you buy a basket of these mostly small caps rather than try to pick the one or two big winners. This is an industry that cries out for consolidation and economies of scale. We believe that fully half the firms we're recommending will be taken over by bigger players in the next few years. Put a package of these stocks away and watch them grow. We think investors that buy water-related stocks today will double or triple their money over the next few years. Among the biggest of the small are:
U.S. Liquids (USL 20 1/8 ASE) is a Texas-based company that provides liquid waste management services in North America and has an emphasis on industrial and commercial wastewater treatment. Is this a 'water' company? Well, they take water humans have already processed and return it to a form they can use again, so we'd say yes, it was.
Ionics (ION 33 1/16 NYSE) happens to be headquartered in Watertown, Massachusetts. Ionics supplies water and water treatment equipment (and chemicals) through the use of proprietary technologies which include electrodialysis reversal systems, reverse osmosis systems and microfiltration systems.
Millipore Corp (MIL 39 NYSE) sells products used for the analysis and purification of fluids. Their specialized products are based on how fluids react across different membranes and certain other technologies that effect separations, mostly through physical and chemical methods.
Osmonics (OSM 9 7/8 NYSE) makes high-tech water purification, fluid filtration, fluid separation, and fluid transfer equipment and instruments.
Nalcon Chemical (NLC 51 3/4 NYSE), produces and markets systems used in water treatment, pollution control, energy conservation, electricity generation, steelmaking, papermaking, commercial building utility systems, mining and mineral processing and other industrial processes. It is not as pure a play on water as some of the others but are diversified across a broad spectrum of industries we can't do without.
Calgon Carbon (CCC 6 1/2 NYSE) has been beaten down to ridiculous levels. The company competes with such major organizations as Dupont and Dow Chemical - and does a pretty good job of it. They are the largest maker of carbons used to treat water in the country. They also provide carbon reactivation, handling and transportation and on-site purification and make activated carbon filtration and extraction systems.
Our personal favorite of the lot is Tetra Tech (WATR 15 1/16 OTC). Tetra Tech literally does it all: they provide environmental and engineering and consulting services and attack the most complex water contamination and other environmental problems. Who ya' gonna call when it's really icky? Tetra Tech. These guys are cutting edge technology with applications that extend to biotech, health care, and other high-tech spinoff areas.
|
