Your #1 Play on The World’s Most Precious Commodity
Snap quiz: What’s the world’s most precious commodity?
It’s not gold. Nor is it crude oil. It’s H20.
Earth is often called the “Blue Planet” because of the copious amounts of water on its surface. About three-fourths of the earth’s surface is covered by water.
It’s counterintuitive, then, that humanity faces a dire water shortage. But demand for potable (i.e., drinkable) water is far outstripping supply. Therein lays an investment opportunity.
Below, I’ll show you the alchemy whereby you can turn water into money. Gold and oil are valuable commodities, sure, but water is the very essence of life. Up to 60% of the human adult body is comprised of water.
Societies around the world are increasingly bedeviled by a global water crisis, spawned by climate change, worsening pollution, overpopulation, inefficient agricultural practices, and inadequate funding of environmental agencies. Globally, unsafe water sources are responsible for 1.2 million preventable deaths each year.
According to recent studies by the scientific journal Nature, the world’s stores of groundwater, which accumulate over millennia in aquifers, are vanishing at an alarming rate. The result is persistent demand for reliable sources of clean, potable water.
How intense is the fight for clean water? People are spilling blood for it. Take a look at the following graphic, published on April 20 by the research firm Statista:
The number of deadly water conflicts is growing in most regions of the world. The most contentious hot spot is Asia, largely due to the region’s fast development and population growth.
Overall, the rate of global freshwater withdrawal and consumption is outpacing population growth. Global water demand will reach 4,350 billion cubic meters in terms of withdrawal by 2040, more than double the rate of population growth.
Human beings will continue to need water, regardless of the cyclical gyrations of the stock market and economy. Water-related investments are recession-proof and should weather any sell-offs that await ahead.
According to projections from the U.S. Environmental Protection Agency, our nation’s water infrastructure requires an investment of at least $384.2 billion. Wastewater infrastructure requires an additional $300 billion.
President Biden’s “Build Back Better” infrastructure spending plan targets not just roads, bridges and railways but also America’s increasingly decrepit water and waste management systems.
So what’s the best water play for individual investors? I prefer First Trust Water ETF (FIW), an exchange-traded fund poised for multi-year growth, with no discernible headwinds along the way.
One of the surest ways to make money is to invest in unstoppable trends that are transforming societies and economies. The growing need for water fits this description.
First Trust Water tracks the ISE Water Index, a benchmark of companies that generate a major portion of their revenue from the potable and waste water industries. With holdings of 36 water-themed stocks, this ETF boasts an asset base of $1.3 billion and a reasonable expense ratio of 0.54%.
The following table shows FIW’s total returns over various time frames:
Source: Yahoo Finance
Unlike its peers in the water ETF sector, First Trust Water’s portfolio is well-diversified across investment classes. The fund’s top five holdings are Danaher (NYSE DHR) at 4.91%; Agilent Technologies (NYSE: A) at 4.78%; Pentair (NYSE: PNR) at 4.59%; Xylem (NYSE: XYL) at 4.56%; and IDEXX Laboratories (NSDQ: IDXX) at 4.31%.
Stable industrial companies with solid balance sheets make up about three-quarters of the fund, with rock-solid utilities accounting for most of the rest.
Cannabis, the commodity…
In addition to the need for potable water, another global megatrend is demand for marijuana. Consumers around the world are clamoring for the recreational and medicinal benefits of cannabis. “Weed” is emerging as a highly valuable commodity, too.
With laws against marijuana falling by the wayside, pot-related investments are poised to generate market-beating gains in 2022 and beyond.
That’s why I wrote a book: The Wide World of Weed and Psychedelics. The product of years of painstaking research, my book is now available. It’s your one-stop primer for cashing in on the marijuana and psychedelics revolution. Click here to secure your free copy.
John Persinos is the editorial director of Investing Daily. He’s also the editor-in-chief of Marijuana Investing Daily.