Investing in Water Stocks: Get Your Share of a $20 Trillion Market

The world's growing population is putting one of our most vital commodities at risk. The companies solving this problem will profit for decades.

The global water industry is already a $500 billion a year business - and it's headed to $20 trillion by 2025.

That's 3,900% growth in 12 years, headed for an amount bigger than the $17 trillion U.S. economy.

The reason for this explosive growth?

According to the United Nations, 783 million people today do not have access to water, and a shocking 2.5 billion people lack basic sanitation. That's why the world is already spending billions of dollars on water.

Now imagine what happens when you add 2 billion more people by 2025. By then, the World Water Organization estimates, water demand will exceed supply by 56%.

The water industry has only just started to meet these needs, which makes investing in water stocks one of top profit opportunities of the 21st century.

Investing in water

Why Water Is So Precious

Unlike spending for other industries, there's no question governments will pay for their water needs. Society can't survive without water - and that doesn't mean just drinking and bathing.

Industrial production is extremely dependent on water.

For example, fracking of the vast U.S. shale oil and gas reserves would be impossible without large amounts of water. A single fracking well requires about 5 million gallons of water, and more than 82,000 such wells have been drilled since 2005.

Then there's agriculture, which uses about 70% of the fresh water we consume. A lack of water can quickly drive up food prices. During the U.S. drought of 2012, global food prices surged by 6% in a single month, with some items like corn (up 23%) and sugar (up 12%) going much higher.

And even though water seems plentiful - it covers more than three-fourths of the planet - it's not. About 97.5% of that is undrinkable seawater, and 70% of what remains is frozen in glaciers.

As the water crisis grows, governments will have no choice but to pay up to repair infrastructure, buy wastewater treatment facilities, and invest in such things as desalination to maintain adequate supplies.

"Over the next 25 years it's expected that spending on water will be more than seaports, railroads, roads, and power combined," Matt Sheldon, the co-portfolio manager of the Calvert Global Water Fund (MUTF: CFWAX) said recently. "This is an opportunity for many different types of companies, from the utilities proving fresh water to the pump companies to the piping companies."

And while investing in water stocks offers a lot of good opportunities, we've found a proven winner that's already up more than 50% on the year...

Investing in Water Stocks: Northwest Pipe (Nasdaq: NWPX)

Many people who have sought to invest in water stocks have focused on companies like Flowserve Corp (NYSE: FLS), Companhia de Saneamento Basico do Estado de Sao Paulo (NYSE ADR: SBS), Aqua America Inc. (NYSE: WTR), and California Water Service Group (NYSE: CWT), as well as water exchange-traded funds like PowerShares Global Water Portfolio (NYSE Arca: PIO), First Trust ISE Water Index Fund (NYSE Arca: FIW), and Guggenheim S&P Global Water Index (NYSE Arca: CGW).

But we say the best bet for investing in water stocks is Northwest Pipe Co. (Nasdaq: NWPX). Since we first told you about this small cap ($348 million) stock in February, NWPX is up 57%, twice the average gain for other water stocks.

NWPX is all about infrastructure - it supplies large-diameter, high-pressure steel pipelines. And that's a great business to be in when much of the nation's water pipelines need to be replaced.

The American Water Works Association estimates that spending on those repairs and replacements will reach $1 trillion over the next 25 years - and $1.7 trillion over the next 40 years.

And water isn't the only valuable liquid for which Northwest Pipe builds infrastructure. Just last month the company won a $35 million contract to supply 400 miles of pipe to transport crude oil from Dore, N.D., to Guernsey, Wyo.

The company handily beat its Q3 earnings estimates, reporting $0.11 a share versus expectations of $0.07 a share.

And several analysts raised their price target on the stock in the wake of that report, seeing potential for growth in 2014.

Last week Boenning Scattergood raised its target to $40, while DA Davidson raised its target from $42 to $48.

NWPX closed at $36.17 yesterday.

At Money Morning we feel that commodities and resource investing is one of the best ways to build wealth. And our Global Resource Specialist, Peter Krauth, recently told Money Morning readers about a forgotten metal (that is, not silver or gold) that he thinks could double.

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About the Author

David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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