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Wealth Virtues Journal: December 11, 2009




GE, Why Not Buy Some POT and Add WTR?


Filed under: Saving and Investing — Tags: , , , , , , — James Ward @ 8:03 pm
© 2009 Poor Richard Web Press, LLC

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Whether or not you subscribe to the proven or theorized cause and effects of climate change, one thing is for certain, the population of the planet continues to grow.  The discussions and debate of the effects of this growth and its impact on climate and the environment bring up all sorts of philosophical and moral dilemmas when dealing with causes and cures for environmental issues.  What sometimes is missed is the fact that regardless of the decisions and outcomes from climate summits and government actions to improve our environment, the growing population still requires food and clean water. It is the recognition of this that leads me to write about three companies whose products affect how this is to be accomplished.

There are those that may read this and think that I simply want to use the notion of a growing population faced with food shortages and dirty water to make money.  My answer is yes, you are correct, but I do so not by exploiting those who are facing hardship, but rather by exploiting the value of companies that will be part of the solution to water and food shortages. Wishful thinking or ridiculous restrictions on how many children can be born in a given family, state, country, etc. will not solve the food and water shortage problem or even any climate issue. Some may think that governments can solve the problems related to food and water shortages, but in reality, it is entrepreneurial ingenuity that provides the solutions. Governments are simply just another customer. There are many industries that provide products that help in the production of clean water and the ability to grow more food. I look at three which not only tackle the problems associated with basic resources for humans, but are extraordinarily good companies for long term investors should consider for their portfolio.

Morningstar states, “with control of 22% of global capacity, Potash Corporation of Saskatchewan (NYSE: POT) is the world’s largest potash producer. The potash market enjoys high barriers to entry, as economically recoverable potash reserves are scarce. As demand for potash grows over the coming years, primarily on the back of increased potash use in less mature nutrient markets, Potash Corporation of Saskatchewan is poised to supply the majority of the world’s growing needs.”

In essence, potash is important for agriculture because it improves water retention, yield, nutrient value, taste, color, texture and disease resistance of food crops, and the Potash Corporation of Saskatchewan is poised to be able to be one of the world’s main suppliers.

When you look to long term growth stocks in companies involved with desalination projects, start with a wonderfully undervalued company, General Electric (NYSE: GE).  General Electric is looking to build desalination plants powered by wind and solar resources.  Desalination requires a constant flow of electricity to push salt water through membranes used to separate the brine from the water.  GE’s solution is to develop ways to store the energy produced from these somewhat erratic sources. GE has double in value since March 9 2009, and is still a great buy as of December 11, 2009.

On a less worldwide level, I would look toward Aqua America (NYSE: WTR).  It is the largest publicly traded American water utility, serving more than 2.5 million people. The company generates about half of its revenue in Pennsylvania but Aqua America’s other subsidiaries provide similar services in 12 other states.

In addition, it provides water and wastewater services through operating and maintenance contracts with municipal authorities and other parties.

Disclaimer: James Ward owns shares of Potash Corporation of Saskatchewan and General Electric



 
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