As concerns grow over water shortages and the quality of
the world's supply, a recent industry survey finds
increased water project spending for 2008 ' but not at the
levels of previous years. And there may be trouble ahead.
According to the survey of 147 professionals working in the
water industry, two-thirds (67%) think water project
spending will increase over the next 12 months ' but that
represents a sizable 14-point drop from the previous survey
in June 2007.
Despite the decline, these results are still relatively
upbeat. However, the survey shows clouds looming over the
industry that could push spending numbers down further '
and they're centered in the U.S.
Zeroing in on the United States
The Wall Street Journal recently reported that 40% of fresh
water consumption in the U.S. is from industrial
applications and that water use normally falls during an
economic recession. Moreover, the stock prices of many U.S.
water utility companies have declined recently on fears of
a recession.
Add to this the findings of our survey, which shows a drop
in the percentage of U.S. water industry respondents who
think project spending will increase over the next 12
months within the private, federal and local government
sectors.
Note the main reason for these more conservative growth
projections is very straightforward: By better than a
2-to-1 margin, industry respondents believe a U.S.
recession would lead to decreased water project spending.
"Investors in water should keep a close eye on water
project spending during a recession," says Josh Levine,
co-editor of ChangeWave Investing. "But our survey also
shows there are still plenty of opportunities out there. In
particular, industry respondents are most excited about two
sectors right now ' Wastewater Treatment and Water
Infrastructure Repair and Replacement. That's where we are
focused."
Respondents were also excited about a short list of top
water companies, with industry behemoth General Electric
(GE) (42%) ranking as the leader. Of course, GE is a huge
conglomerate and water is only a small part of their
business. But there are a handful of other companies
industry respondents cited as having momentum:
- American States Water (AWR) ' the one utility of this
group, engaged in the purchase, production, and
distribution of water for California residential and
commercial customers. California's favorable regulatory
environment and rapidly increasing population bodes well
for the company's future profits.
- Flowserve (FLS) ' a seller of precision-engineered flow
control equipment, Flowserve receives two-thirds of its
business from overseas markets in water as well as other
industries. Lately the company's been on a roll, having
experienced record bookings in 2007.
- Gorman-Rupp (GRC) ' the company's pumps and fluid control
equipment are used in water, wastewater, and other
industrial applications. Gorman-Rupp recently announced a
5-for-4 stock split and is enjoying record sales, a boost
in new orders, and increased penetration within
international markets.
- Calgon Carbon (CCC) ' focuses on purifying water and air
with its granular activated carbon, which is used in the
removal of organic compounds from liquids and gases.
Recently it's been an exceptional performer in the water
group, its shares rising considerably over the past year.
- Nalco Holding Co. (NLC) ' provides water treatment
products and services to prevent corrosion, contamination
and the build up of harmful deposits. Its focus is on
production processes that enhance efficiency and improve
customers' end products.
Ben Franklin stated it clearly more than two centuries ago,
"When the well's dry, we know the worth of water."
And while there may be blips in the rate of water spending
short term, wise investors know that water issues are going
to be with us for centuries to come.
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companies, visit: http://blog.changewave.com
The ChangeWave research network is composed of 15,000
highly qualified business and technology professionals.
Members are surveyed on a range of topics, and the findings
are converted into quantitative and qualitative reports.
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