If you watched the movie The Big Short and paid close attention to the notes at the end, you may have caught some solid investing advice about stocks to buy in the 21st century. Michael Burry, played by Christian Bale, was one of only a handful of investors who saw the mortgage crisis coming ahead of time. Burry made millions of dollars from the chaos, thanks to his incredible foresight.
At the end of the movie, an on-screen update about Burry said the following: “Michael Burry is focusing all of his trading on one commodity: water.”
In fact, in an interview back in 2010, Burry said that he sees major value in water and has invested accordingly.
“I believe that agriculture land — productive agriculture land with water on site — will be very valuable in the future,” he said. “Fresh, clean water cannot be taken for granted.”
In fact, analysts see a growing gap between water demand growth and water supply growth. That one-two pun will inevitably lead to global water crises in coming years. Here’s a look at three stocks to buy to profit on one of the biggest market trends of the 21st century.
Water Stocks To Buy: Xylem Inc (XYL)
Unfortunately, there’s no way to manufacture more water. Instead, we simply must be more efficient with the water we have.
A big part of that efficiency will come from waste water treatment technology. Xylem Inc (NYSE:XYL) is a major provider of water industry engineering solutions. The company has a large presence in China as well. Increasing urbanization, coupled with a massive population, could be a recipe for water supply disaster in China.
One of XYL’s largest segments focuses on water infrastructure technology. This segment includes smart infrastructure and metering. Here in the U.S., President Trump has pledged to devote up to $1 trillion to infrastructure improvements within the next 10 years.
Making sure America has access to clean water is a top infrastructure priority. Therefore, a large portion of that massive public investment will likely go straight into the pockets of companies like XYL.
Water Stocks To Buy: Pentair (PNR)
Pentair plc. Ordinary Share (NYSE:PNR) specializes in all things water. The company provides products and services in water purification and filtration. Additionally, PNR provides irrigation management, desalination and aquaculture systems services.
According to Pictet Asset Management analyst Arnaud Bisschop, water filtration is key. PNR’s consumer-targeted water filtration products may soon be the best option for people living in regions lacking clean water.
“These point-of-use systems are a way to add a layer of safety for the consumer if they want to drink tap water,” Bisschop says. “More and more people in China want that safety net.”
As an added bonus, PNR has significant exposure to the battered oil and gas industry. Because of the energy downturn, investors have a chance to buy PNR stock at a 25% discount to where it was trading just three years ago. That same oil and gas exposure could also help drive PNR’s future earnings growth as the industry recovers.
Water Stocks To Buy: Powershares Water Resource Portfolio (PHO)
If you’re looking for the best diversified way to invest in water, the Powershares Water Resource Portfolio (NASDAQ:PHO) ETF is worth a look. The fund has more than $860 million invested in 38 global companies operating primarily in the water business. Investments range from water utilities to water infrastructure companies to water equipment providers.
XLY stock and PNR stock are both top holdings in the fund.
“Because of underinvestment in basic water infrastructure over the past several decades, it is believed that the water investing theme is still on the early stages and has a long runway for growth,” Morningstar analyst John Gabriel said of PHO back in 2014.
Still, a global water crisis may take years or decades to materialize. Therefore, with an investment horizon that’s so long-term, diversification is probably a good idea. The PHO ETF is the best diversified water pure play on the market today.
As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.