Water Technology Investments

Posted on Mar 24, 2016


The focus on clean water continues to grow…

The first national water summit was held at the White House yesterday. The summit was focused on improving water technologies and encouraging investments into the nation’s water infrastructure.

Among the most interesting announcements for investors was a $ 4 billion private capital commitment from the White House to invest in a wide range of water infrastructure projects across the country.

But that’s just a drop in the bucket compared to what the U.S. will have to spend in order to repair and upgrade its aging water system.

According to the EPA, over $ 600 billion in investments will be required for water infrastructure improvements over the next 20 years alone!

And it’s all shaping up to look like one of the single-greatest investment opportunities of the 21st century.

water infrastructure in the us 2016 1There simply is no alternative to water.

Every other commodity has some sort of alternative.

But nothing happens without water.

Given rapid population growth, declining supplies of clean drinking water, aging infrastructure, and now solid political support, the water industry is set to grow exponentially.

And today’s investors will be handsomely rewarded.

Several weeks ago, we promised to bring you some new water investment ideas. And after careful review of several different water plays, I’ve found one with a pretty interesting edge that you might want to check out.

Xylem (NYSE: XYL)

xyl2016

Xylem is a world leader in highly engineered water technologies, specialty services, and equipment, and it has already established its roots in the $ 550 billion global water industry.

The company has a broad portfolio of products and services that address full cycle of water — from collection, distribution, and use to the return of the water to the environment.

The company reports its results in two broad segments: Water Infrastructure and Applied Water.

Xylem’s Water Infrastructure side of its business focuses on the transportation, treatment, and testing of water for large public utility municipalities and industrial customers.

The company offers a wide range of products including water and wastewater pumps, treatment and testing equipment, and controls and systems.

And this is exactly what sets this company apart…

Xylem is not an owner or builder of water infrastructure. Rather, the owners and builders of water infrastructure are customers of Xylem.

Xylem essentially provides the “picks and shovels” for the water infrastructure industry. And the company does this in more than 150 countries through a number of market-leading product brands — way too many to mention here.

And that’s just part of the business.

Xylem’s Applied Water segment encompasses the many uses of water, focusing on the residential, commercial, industrial, and agricultural markets. The segment’s major products include pumps, valves, heat exchangers, controls, and dispensing equipment.

In both segments, the company benefits from a large and growing installed base of products, which drives aftermarket revenue for replacement parts and services.

Companies like Xylem are poised for growth, as the U.S. and the rest of the world will be forced to repair or upgrade its aging water infrastructure.

Right now, I think shares of XYL are a little pricey nearing $ 40. And this is not a stock that I personally own. However, if prices move closer to the $ 35 range, I’d want to own XYL and hold for the long term.

For more information on Xylem, visit its website.

Good Investing,

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Luke Burgess
Energy and Capital

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