Water stocks are poised to be one of the fastest growing investment sectors in 2017 – and with good reason.
According to the U.N., water usage has grown twice as fast as the world’s population over the last century. Today, we use about 30% of the world’s total accessible renewal supply of water. In less than 10 years, that percentage could reach 70%. By 2025, almost 2 billion people will live in areas plagued by water scarcity, with 75% of the world’s population living in water-stressed regions!
Making matters worse, the water infrastructure in most developed countries is aging… and we haven’t taken any steps to upgrade it yet. The American Society of Civil Engineers (ASCE) believes that most of our drinking water infrastructure is nearing the end of its useful life and gave the country’s drinking water and sewage infrastructure a “D” grade. Without upgrades, the U.S. is facing a loss of almost $500 billion in GDP due to increased costs to households, loss of worker productivity, increased wasting of water, and more frequent disasters like what recently happened in Flint, Michigan.
These issues sound scary – but they’ve also created some amazing opportunities for smart investors (like Dr. Michael Burry from The Big Short).
And they’ve created an amazing opportunity for you too.
That’s why I’ve created the official Water Stock Guide for Q1 2017.
This guide has 250 pages of awesome information on the 40 best water stocks to buy right now. Each water stock covers 6 pages, with segments detailing each company’s operations, financial history (going back 10 years), management team, and valuation.
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For a preview and a detailed overview of the Water Stock Guide, keep reading below. And if you have any questions about the guide, please don’t hesitate to shoot me an email.
Water Stock Guide Preview
You can access a preview of the Water Stock Guide by clicking here or scroll through a preview of the Water Stock Guide below:
The Framework for this Guide
This guide is meant to help the intelligent investor find the best water stocks to invest in and to provide relevant information to help investors allocate their capital wisely.
On the following pages, you’ll find valuable information on the 40 best water stocks to buy right now. All of these water stocks are listed on either the New York Stock Exchange (NYSE) or the Nasdaq.
As a value investor focused on fundamental analysis and long-term investment horizons (and as a proponent of the value investing and intelligent investing philosophy), I’ve taken a page out of Warren Buffett’s book and organized this guide based on the four investment criteria he looks at when investing in a business or stock:
WARREN BUFFETT STOCK INVESTMENT CRITERIA
We select our marketable equity securities in much the same way we would evaluate a business for acquisition in its entirety. We want the business to be:
- One that we can understand,
- With favorable long-term prospects,
- Operated by honest and competent people, and
- Available at a very attractive price.
We ordinarily make no attempt to buy equity for anticipated favorable stock price behavior in the short term. In fact, if their business experience continues to satisfy us, we welcome lower market prices of stocks we own as an opportunity to acquire even more of a good thing at a better price.
Investing should not be complicated. In fact, the game is really in making your decision-making process as basic as possible – and in sticking to that process. Foolish investments occur when investors start thinking they know more than they really do and then make complex and misguided decisions. As Ben Graham, the father of value investing, once said: “The investor’s chief problem – and even his worst enemy – is likely to be himself.”
I believe that if you can find a business that just meets Buffett’s four simple criteria – a business you can understand, with favorable long-term prospects, operated by honest and competent people, and available at a very attractive price – then you’ll be well on your way to investing success.
At a Glance
“ONE THAT WE CAN UNDERSTAND”
Information for each water stock in this guide covers 6 pages. The first page is the “At a Glance” section. This section is intended to help you understand the company, its business model, and its operations. It includes:
- A snapshot of the company’s financial position, valuation, and other relevant data
- A chart of the water stock’s recent price history
- A detailed description of the company’s operations, business model, and history
- A categorization of the company’s sector and industry
- Information on the number of employees, headquarters location, and contact information.
“WITH FAVORABLE LONG-TERM PROSPECTS”
The next section, which covers three pages, is the “Financial Overview” section. While an analysis of a company’s long-term prospects requires knowledge of the industry’s dynamics, its competitive positioning in that industry, and a variety of other qualitative factors, a business’s financial health and historical financial performance can go a long way in helping you answer that question. The first page of this section contains six charts, as described in more detail below:
The following two pages include 10 years of full financial statements, including income statement, balance sheet, and statement of cash flows, as well as year-to-date financials and a prior period year-over-year comparison.
“OPERATED BY HONEST AND COMPETENT PEOPLE”
The following page is the “Management Assessment” section, which is intended to help you analyze the quality and capability of the company’s executive management team, as well as the strength of its corporate governance.
This section includes a list of the company’s executive management team, compensation figures for the past five years, and a detailed overview of each company’s CEO. The CEO overview includes a high-level biography, other board membership, shares held, and significant ownership in other companies. recent transactions (massive amounts of selling could be a danger warning, while buying might indicate that the CEO thinks the stock is undervalued or is confident in his ability to create more value for the company).
This section also includes an overview of each company’s Board of Directors and a summary of the company’s ISS Governance QuickScore. A QuickScore of 1 means that the company is in the 1st decile of governance practices (i.e., high quality governance practices and low governance risk) and a score of 10 means the company is in the 10th decile of governance practices (i.e., low quality governance practices and high governance risk). An overall score is provided, as well as an individual score for Audit & Risk Oversight, Board Structure, Shareholder Rights, and Compensation.
“AVAILABLE AT A VERY ATTRACTIVE PRICE”
The final page for each water stock contains the “Valuation” section. This is the final piece of the puzzle. The relationship between price and value is one of the most important points to keep in mind when investing. Almost any stock can be a great investment if the price is low enough, and every stock can turn out to be a terrible investment if the price paid is too high.
There are many different ways to calculate the intrinsic value for a company. If you put 1,000 investors in a room and told them to value a particular stock, you would likely get 1,000 different answers. One way to determine the value of a company and its relationship to the stock’s price is to look at various valuation multiples.
The “Valuation” section includes 10 years of history for the following valuation multiples:
- Price/Operating Cash Flow
- Price/Forward Earnings
- PEG Ratio (P/E ratio divided by EPS growth rate)
- Earnings Yield (Earnings/Price)
- Enterprise Value/EBITDA
In the “At a Glance” section, you can also find current multiples for FCF Yield (FCF/Price).
These valuation multiples should serve as a guide in helping you determine whether a water stock is undervalued or not. Note that you won’t find any intrinsic valuations in this guide. This is the task of the individual investor. With the financial data provided in this guide and a good analytical look into the future prospects of the company, you should be able to determine an intrinsic value without a problem.
Just remember: Price is what you pay. Value is what you get.
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