Dry conditions across the globe continue to threaten access to fresh drinking water. This challenge continues to accelerate, but opportunity emerges for investors looking to profit from the world's most important commodity. After all, in our Western world, H2O is available in abundance - whether from the drinking bottle or the household tap. But in fact, water is the most essential raw material globally, far more important than any precious metal or fuel.
| | | | | | From The Old West to the Middle East, We Have a Problem |
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|  Dear Reader,
I want to ask a question.
Have you thought deeply about the issue with water today?
Probably not.
After all, in our Western world, H2O is available in abundance - whether from the drinking bottle or the household tap. But in fact, water is the most essential raw material globally, far more important than any precious metal or fuel.
Water is the source of life.
But what we in the West tend to forget: Water is scarce - especially in poorer countries, for example, in Africa, this is a serious challenge. Experts estimate that 2.2 billion people around the globe have no regular access to clean water.
That's more than a quarter of the world's population.
In the wake of climate change and a steadily rising population, water scarcity is increasingly becoming humanity's critical problem. The issue is becoming a major issue in the Western part of the United States due to a state of emergency along the Colorado River. But for the bulk of Americans, it remains out of the headlines.
There are also approaches to solving the problem - including from the business sector. Given the problems described above, avoiding water wastage is now a lucrative business that not only gives us investors a clear conscience but can also generate returns.
Let's look at one company that caught my attention.
Xylem - All About Water Optimization
One such investment opportunity is the U.S. company Xylem.
The company is considered a leader in the field of water technology. It develops innovative and smart solutions to meet humanity's water and wastewater needs.
Its products include high-performance pumps, pipe inspection sensors, classic water meters, agitators, treatment plants, filters, valves, heat exchangers, water turbines, and analysis software.
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| | | | | | | For example, the company's sensors can detect leaks in pipes and thus limit water waste. Xylem's customers include several industries. Among them is agriculture. Even under the harshest conditions, farmers and growers rely on Xylem's complete solutions for water supply, wastewater treatment, and water analysis.
But the company's solutions are also used in commercial building construction - such as hotels, schools, hospitals, offices, and shopping centers - to make water management more efficient and gentler. Finally, Xylem supplies the food and beverage industry with various applications related to optimizing water consumption.
For the company, which has long been active in the mega-markets of India and China, the business model is a goldmine. After all, the demand for water optimization will increase rapidly in the coming years.
Fundamentally, it also looks solid. In the first six months of 2021, Xylem increased its sales by 14% to $2.28 billion. Net income shot up nearly 190 percent to $200 million.
Management expects continued growth for the full year.
The only drawback is that Xylem's share price is already relatively high. This also has to do with the fact that the company is one of only two ecologically exemplary mechanical engineering companies in the "MSCI ESG" sustainability ranking.
A rating that seems to be very palatable to investors.
Nevertheless, it is still worth keeping an eye on the stock.
Enjoy your day, |
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| | | Dr. Gregor Bauer
Chief Analyst, European Markets |
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