NexGen Trends in the Oldest Resource of All

The ongoing tragedy in Puerto Rico continues to put the spotlight not just on the situation there but on broader concerns as well. This week, we’ve heard more about the serious lack of clean water on the island, which is obviously raising all kinds of health and sanitation fears. According to some reports, water is being pumped out of potentially toxic sources, but the people on the island are so desperate for water that they are drinking it and using it for bathing and laundry anyway.

We talked last week about how NexGen solutions can help with the problem of electricity. The same is true when it comes to water, which is actually a significant problem all over the world. There are literally hundreds of millions of people – nearly 845 million, according to WaterAid Global – who suffer from a lack of drinkable water. The consequences are real, too. A newborn baby dies every minute from infection caused by unsanitary drinking water and an unclean environment, which is just horrific.

We are fortunate to have access to clean water here in the United States, but there are still regions of the country that consistently deal with droughts, and the aging water infrastructure is another big problem. The infrastructure is consistently rated near failing by the American Association of Civil Engineers, which is not really surprising considering that some of the pipes were installed over a century ago. Still, those water main breaks (240,000 per year) and leaking pipes (nearly six billion gallons of water lost every day) really add up.

Technology is already providing solutions, and that will increasingly be the case for years to come as the global water problem is expected to get worse before it gets better. One solution is desalination, which makes ocean water drinkable and usable by removing the salt. This process is already used in many places throughout the world, with the largest plant located in Saudi Arabia. California also has a big plant in the San Diego area, which can certainly suffer from long dry spells.

In addition, new technology is helping provide better ways to use the clean water that is available through smart networks and irrigation systems. Sensors, software and control devices offer real-time monitoring that allow utilities to monitor their entire system, measure and control flow and be alerted immediately to problems.

Stocks to Watch

It’s clear that serious changes are needed to protect people now and in the future to supply more clean water to more people. The good news is that many companies are working hard to do just that, and that means there are some interesting NexGen opportunities out there.

There are many ways to profit from the clean water mega-trend, with the broadest being through several exchange-traded funds (ETFs) that are currently out there. You should be aware that each has its own strategy on how to garner exposure to the industry’s top names. Some concentrate almost exclusively on U.S. water utilities while others will diversify into water infrastructure.

One I like is the Guggenheim S&P Global Water ETF (CGW), which is comprised of approximately 50 global stocks that include utilities, infrastructure, equipment, materials and instruments. It also provides a well-rounded approach to this global trend, with a balanced exposure to the United States (43%) and Europe (41%). CGW is up more than 20% already this year, and I am currently watching it for the right buy signal.

Diving a bit deeper into the trend, I’ve come across one company in particular that has all the attributes of a NexGen stock: Xylem (XYL). I like its fundamentals, its technicals and its intangibles. The company operates three divisions: water infrastructure, applied water and Sensus, a company Xylem acquired in 2016. XYL provides everything from pumps to testing equipment to cloud-based software to monitor water safety and usage. Earnings are growing at a solid pace and the stock has been in the midst of a strong uptrend after breaking out of a trading range in July. The key now is getting the right entry, so I’m watching the chart very closely.

There are other water-related stocks on my watch list, like a smaller company that makes water management products and also has a road infrastructure products division. This stock has pulled back from a double-top to price support and its 200-day moving average. After holding support recently, it is now trying to stage a breakout from the newly-formed base. I’m watching for confirmation before recommending the stock.

These are just several opportunities in a mega-trend that we know will keep growing. New start-ups and technological advancements continue to hit the scene, including those using satellites, artificial intelligence, big data, nanotechnology, sonar technology and more. Many are not yet publicly traded much less ready for our hard-earned money, but there will be more winners in the future, and that’s what makes NexGen investing so exciting and profitable.

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