Investing in Water Companies

I love when the news makes my job easy.

But when you’re ahead of the curve, that’s what happens.

For weeks now, I’ve been telling you about the serious problems facing the world’s adequate supply of clean water. And for weeks, news story after news story has validated my thesis.

(Click here for parts one, two, and three.)

It’s no different this week.

271 Million Pounds of Drugs in Drinking Water Sources

According to a recent Associated Press investigation, "U.S. manufacturers, including major drugmakers, have legally released at least 271 million pounds of pharmaceuticals into waterways that often provide drinking water."

And that’s after a report last year in which they found "a wide range of pharmaceuticals — including antibiotics, anti-convulsants, mood stabilizers and sex hormones —  in the drinking water of at least 51 million Americans."

That means drug-tainted water for nearly one in five Americans.

The risk? According to the report, research has shown "that human cells fail to grow normally in the laboratory when exposed to trace concentrations of certain drugs."

When several big drugmakers were asked if they’ve tested their wastewater for escaped pharmaceuticals, none of them answered directly.

Blood-thinners, codeine, antibiotics, epilepsy drugs. . . they’re all adding to our water woes, multiplying the effect of industrial pollution that is slowly choking what little freshwater supplies we have left.

The ‘Nexus’ Strikes Again

But pollution is only one aspect of our water woes — I’ve already told you about the pesky problem called the energy-water nexus. And it’s consequences are growing more severe.

The news this week isn’t about the large amounts of water required for energy production with coal or oil, but rather about its use at large solar installations in the desert.

You see, water’s implications are far-reaching. Even activities generally thought of as environmentally benign — like solar installations — require copious amounts of blue gold. And these conditions will only worsen.

Using the AP as a reference once more, would-be solar installations "are encountering overtaxed aquifers and a legendary legacy of Western water wars and legal and regulatory scuffles." In some cases, the aquifers near planned solar arrays are already over-appropriated.

So, the fate of 150 planned desert solar projects — and all the clean energy they’d produce — is unclear.

Water affects energy. Energy affects water.

According to Kim Fiske, managing director of Iberdrola Solar, which has 12 solar applications in four desert states, "Everyone is concerned about water. It’s probably one of the biggest issues."

By default, that means solving water issues will come with a high pricetag. After all, everyone wants it. . . and needs it.

More Water Solutions, More Water Profits

Last week, I mentioned Veolia Environment (NYSE: VE), saying it was a "sure bet as the stimulus money begins flowing and water issues start rising to the surface."

Five trading days have passed since then. Here’s what happened:

As the DOW stayed flat, VE surged 15% higher.

This water issue is real. And so are the profits.

The key is identifying specific areas slated for investment, and set your traps.

Take the drug-pollution issue. VE, along with several other companies I follow, provides management and operations services to drinking water and wastewater plants. So, as I said last week, this one is a sure bet as increased measures are taken to preserve our dwindling clean water supplies.

Another way to play this crisis is through part manufacturers. They are the ones providing vital products crucial to building new treatment plants and upgrading other infrastructure.

A company I like in this space is Flowserve (NYSE: FLS). Readers of Alternative Energy Speculator have already played this one twice for profit (and they were in on the 15% VE surge).

Like VE, Flowserve has a lot of room to climb after being knocked down from the recession:

I think we could see $100 for that stock — which would be a double — in 18 months’ time. These water problems are not going away on their own.

And as I told you last week, I’ve compiled a special report to compliment this Blue Gold series. In addition to the winning stocks I’ve told you about so far, this report has all the details on a desalination stock I think could easily triple.

It’s jumped over 20% since last week.

Years of easy water profits are at hand. You’re only leaving money on the table if you wait to stake your claim.

Call it like you see it,

Nick