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Monday, 29 January 2007

Water Water everywhere..............or is there ? How to invest in Water or Blue Gold

Some of you may have heard of T. Boone Pickens, for those of you that have not he is one of the worlds most famous Oil and Gas Billionaires. He founded a company called Mesa Petroleum with $2,500 and turned it into a billion-dollar company.So with oil reportedly running out and prices still way higher than they have been for years( we are currently thinking oil has become incredibly cheap at $50 a barrel-it was only in Oct 2004 that oil hit $50 for the first time and that was a record high!!!) then you would think that this 78 yr old billionaire would be very happy to sit back and enjoy the wealth brought on by one of the worlds most important Natural resources getting more and more scarce.It may surprise you then to know that he has been very busy buying up as many rights as he can to an even scarcer resource that we all tend to take for granted.........WATER.

He has set up a new company.Mesa Water and is investing heavily in water rights in Texas, he plans to pump the water to other areas in Texas such as San Antonio, Dallas-Fort Worth to name but a few.........for a price of course.

What this tells us is that the BIGGEST natural resource issue we will face in the coming years is access to fresh water.Our planet is awash with water, unfortunately a lot of it is salt water and with the increasing industrialization taking place in countries like India and China, the water resources they have(which were already fairly scarce) are becoming polluted and unusable not only for drinking but for use on crops and farmland.

This means that companies who own large amounts of water or those who are involved in desalination or water infrastructure could do very well in the years to come.Currently we are starting to see water and water related stocks hitting the mainstream press but I think we are still likely to be in ahead of the crowd if we move quickly.

I have had a holding in VEOLIA ENVIRONNEMENT -ADR, (VE) which provides environmental services to municipalities and corporations worldwide. for the past 6 months or so and in that time it has risen 32% or 60% annualised.I think in the mid term there is still plenty of upside for VE as it is I believe extremely undervalued given its prospects.

Another possibility is PICO HOLDINGS INC, (PICO) operates in five industry segments: property and casualty insurance; surface, water, geothermal and mineral rights; medical malpractice liability insurance; portfolio investing; and other.

PICO is slightly more diversified but nonetheless is well positioned to take advantage of the worlds increasing need for water.

As ever do your research, these stocks should not be too volatile so I would be comfortable placing a 15-20% stop loss on any purchase and be prepared to hold them for a few years.

Best Wishes


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