The Forgotten Commodity Your Portfolio Needs

If you’re like most Americans, you’re accustomed to things just… working.

Flip a switch, the lights come on. Go to the store, shelves are stocked. Turn on the tap, water comes out.

You could be forgiven for taking it for granted – I certainly do. But safe, plentiful tap water is actually extraordinary.

Americans enjoy some of the safest water on Earth. The water you used to shower or brew a pot of coffee this morning might have traveled hundreds of miles through complex infrastructure and rigorous treatment to get to you.

Unfortunately, this everyday miracle is getting harder and harder to pull off. But the solutions are about to mint fortunes…

Some American water and sewer systems are showing their age.

In fact, I’ve had the dubious pleasure of seeing this up close. Of looking down out my office window at a cracked sewer main that last saw daylight during the Johnson Administration…the Andrew Johnson Administration, in 1867.

But most pressing is the dwindling supply of water itself. Aquifers - underground sources of freshwater that can take millions of years to build up - are drying up at an alarming rate.

A database of more than 80,000 wells across the U.S. shows 45% of them have experienced 40-year declines. Another 40% have been depleted to record low levels.

The situation is so dire, one expert claims, “From an objective standpoint, this is a crisis. There will be parts of the U.S. that run out of drinking water.”

And the problem is not isolated to the hot, dry West. It’s more widespread than many Americans realize.

In fact, there are ominous signs in places like Kansas, where some regions are losing the ability to support the agriculture that bankrolls the local economy. And even in muggy Maryland, on the Chesapeake Bay, drinking water is running short of supply.

Zoom out to a global level, and by 2025, around 66% of all people will live in “water-stressed” regions.

Yet this is the quintessential “there’s bad news… and good news” scenario. Because there are solutions to these problems.

More importantly, implementing those solutions - adapting and mitigating this water crisis - is going to mint fortunes over the coming years and decades. And savvy investors should be priming their portfolios now for the gains to come…

The Smart Way to Play Water

With so much at stake, it’s no wonder some of the sharpest, most successful investors on the planet have identified water as the vital, undervalued commodity.

Dr. Michael Burry, of The Big Short, was (in)famous for going all-in on water in his portfolio for years. Of course, this is only kinda-sorta, technically true… Burry played water via a variety of vehicles.

But water was his central “thesis,” though. And everything tied back into water.

Of course, like Burry, you could invest in farmland or water rights. He’s reputed to have owned significant acreage in California’s almond-growing regions.

But we can take a more streamlined approach... One that’s not going to set us back millions and handcuff us to interest rates.

Now, everyday investors, like you and I, have access to several exchange-traded funds (ETFs) indexed to the water industry, like…

  • Invesco Water Resources ETF (PHO)
  • First Trust Water ETF (FIW)
  • Global X Clean Water ETF (AQWA)
  • Invesco S&P Global Water Index ETF (CGW)

And there are many more.

That’s a “one-size-fits-all” approach.

But I think it’s best to make an end run around all those and go after maximum exposure to the commercial and residential water market.

That’s why I’ve zeroed in on American Water Works Co. (AWK).

If you’ve been a long-time Money Map Report reader, you may recognize this name. And you know this opportunity delivered gains as high as 387% when it was in the model portfolio.

But I think now might be an ideal time to revisit this register ringer.

You see, the 137-year-old New Jersey-based utility provides water (and wastewater removal) to around 14 million customers in 14 states from Hawaii to Maryland. That makes it one of the largest, most geographically diverse water utilities in the country U.S.

American Water Works is the quintessential long-term hold. It’s a company you buy and let appreciate, collecting dividends It currently pays out $0.71 per share, or a 2.03% annual yield. And it’s this dividend that’s helped shares of American Water Works outperform the S&P 500 over the past five years.

But using a DRiP – a dividend reinvestment program – would propel those gains even higher!

Of course, the company has been buffeted by some fairly soggy weather over the past few months. Investors perceive momentary water surpluses as “bad” for shares. But they’re completely overlooking the bigger picture... though that provides us with an opportunity.

Since its second quarter earnings release in July, shares are down around 7%. And that’s despite beating expectations and improving its bottom line by 20%. But what excites me most is American Water Works’ recent acquisitions and infrastructure investments. These are the company’s bread and butter. And it’s how it’ll lock in future profits by expanding its foothold into new markets.

For me, this is a great time to buy American Water Works shares. They’re currently trading around 13% below their 52-week high. But with the emergence of an El Niño in the Pacific, the weather could be favorable for the company’s growth in the medium term.

Water – The Next Triple-Digit Return?

Let’s set aside artificial intelligence for now.

It makes more and more sense to invest in hard, tangible “stuff” at the moment.

On Wall Street, valuations are out of control. Particularly for companies that don’t actually make or do anything.

But water, and American Water Works, are  great examples of tangible investments every person needs. Water should be thought of as a commodity, like gold or oil. And you should dedicate a portion of your portfolio to it accordingly.

The water crisis is a long-term problem. And it’s going to require large-scale, economically transformative solutions that are going to take years to implement to solve. Orange County’s solution cost $480 million and 10 years to build. On top of that it costs $29 million per year to operate. But, as I said, the economic and social benefits are incalculable. And the rewards will be  reaped for generations to come.

The most successful investors are the ones who can look beyond the next quarter… beyond the upcoming earnings call… beyond today’s headlines. They’re focusing on timescales of years and decades… sometimes longer.

And taking the long view is all about achieving superior returns.

That’s precisely what Chris Johnson is doing. He’s looking at several long-term opportunities to secure steep discounts on some of the most expensive, best-performing shares on the market right now. He’s found ways to get into stocks like Alphabet (GOOGL) for $15 per share. That’s pennies on the dollar. And CJ’s strategy can reward folks bold enough to take that long view with 10X profit potential. Here’s how…

Bottoms up!

Greg Madison