This water stock has the potential to become one of the most profitable long-term investments of all time. It already had returns of 148% since we recommended it to our readers back in 2011.
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- Why This Water Stock Is Our Pick of the Week
- Pentair Inc. (NYSE: PNR): How this Water Stock Delivered Double-Digit Gains in One Day
- Investing in Water Stocks: Three Names to Buy Right Now (SBS), (PNR), (PIO)
The water stock Consolidated Water Co. Ltd. (Nasdaq: CWCO) is the Money Morning Pick of the Week.
Consolidated Water stock also taps into one of what Money Morning Chief Investment Strategist Keith Fitz-Gerald likes to call "unstoppable trends." In this case, the trend is scarcity and allocation.
Despite a slump in the sector last year, the long-term prospects for water stocks have never been better.
Pentair, which specializes in filter and pump manufacturing, will buy Tyco's flow control business for $4.6 billion in an all-stock deal. Tyco's flow business sells valves and thermal controls.
Pentair Inc. Price History
The news shot PNR stock up 19% to $47.85 in early morning trading.
Pentair is already poised to profit from the world's growing need for clean water, as we detailed Tuesday. Investors who bought in to Pentair at Tuesday's closing price could have netted a double-digit gain today.
Now Pentair's merger with Tyco will give it an even bigger market share in the growing water solutions industry. Pentair will expand its product offering to include pipes, valves, and control products, and increase its industrial exposure and global reach.
"The new Pentair will be well positioned to benefit from the increased demands on energy, water, infrastructure and industrial process resulting from the growing population and wealth of developing economies," Pentair CEO Randall Hogan said Wednesday in a conference call. "The combined company will have increased scale, broader geographic reach and greater access to high-growth attractive sectors."
Water may be everywhere but only 3% of it is fresh or suitable for drinking. Two-thirds of that is locked in glaciers and polar icecaps, which means less than 1% of the world's fresh water is available for human use.
That's the water found in lakes, rivers, reservoirs, and underground sources shallow enough to be accessed cheaply. Even still, much of that is polluted or otherwise unsuitable for consumption.
The water that's left is then used in agriculture and industry, and here's the kicker: It is divided between seven billion people... and demand is increasing all the time.
According to the United Nations, in the last century water use has increased at more than twice the rate of population growth.
Water has become so critical that Willem Buiter, chief economist at Citigroup, believes it will soon become "the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals."
That may be hard to imagine, considering we can simply turn on the tap and get fresh water for next to nothing.
But it's true. There are myriad of factors-from population growth to climate change-putting a strain on the world's water supply and causing demand to spike.
We'll look at those factors and how investors can benefit from this growing demand by investing in water stocks.