Water, Water Everywhere, At Least For Now

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This week we’re looking at utility companies. This sector includes electricity, water/sewer, garbage, even natural gas and oil if used for heating. When we ran the sector through our proprietary algorithm, we ended up with three water utilities for our candidates this week.

The global water market is estimated to be around $600 billion with an annual growth rate of 7%. By the year 2030, it is expected for there to be a 40% global shortage of available freshwater. The cause of this will be a combination of population growth, depletion of groundwater sources and insufficient management of water infrastructure.

The solution will have to come from water utilities. So let’s check in with out three candidates for the week…

First up, we’ve got Middlesex Water Company (MSEX). Middlesex Water Company provides a full range of water and wastewater related services in parts of New Jersey, Pennsylvania and Delaware. The company has been around since 1897 and provides its services to residential, commercial and municipal clients.

Last year, the company broke ground on the Western Transmission Main project. This is a $52 million pipeline intended to provide critical backup water supply and help ensure resiliency in the company’s water distribution system. This project supplements the existing transmission main in NJ and runs through two densely populated municipalities.

This is an example of the management setting up for the future, and its just one of many projects. The company is working to convert from sodium hypochlorite to ozone to mitigate the effects of an accidental incidence. The company is working on a new state-of-the-art wastewater treatment plant in Delaware to serve the projected growing population. On top of this, the company si working on proactive replacement of mains, valve and hydrants.

The proactive replacement of infrastructure is important when a system has been around for over 100 years. When underground water mains break, there is more destruction and inconvenience than preplanned maintenance.

Shares opened last week at $58.95 and closed on Friday at $61.88. That’s an increase of 4.9% last week. We’ll have to see if shares will keep that momentum a second week in a row.

Next up, we’ve got AquaVenture Holdings Limited (WAAS). This is not a new company to our Alpha contest. The algorithm identified it as one to watch the last time we looked at utilities during the first week of April. It was our Alpha for that week, so we’ll have to see if it will take the title again this time.

AquaVenture provides customers with a reliable and cost-effective source of clean drinking and process water primarily under long-term contracts. Basically, it’s a water utility that offers solutions in North America, the Caribbean, Latin America and the Middle East.

The business is divided into two operating platforms Seven Seas Water and Quench. Seven Seas Water was founded in 1996 and is a multinational provider of water management solutions. Its main goal is to address the scarcity of clean drinking water throughout the world.

Quench is part of the business that deals with bottleless filtered water coolers and other products that use filtered water as an input. The other products include ice machines, sparkling water dispensers and coffee brewers. It provides there to customers all across the US.

At the beginning  of the month, the company announced that Quench acquired Aguaman Inc. Aquaman is a point-of-use filtration company based in Miami. This is Quench’s 10th acquisition since the beginning of 2018. The management makes sure that it is well positioned to capitalize on acquisitions that will benefit the company’s portfolio.

The company currently operates over eleven water treatment facilities and previously operated over 50 desalination plants. The company has installed more than 140,000 filtered water systems through organic growth and targeted acquisitions.

Shares opened last week at $18.51 and closed on Friday at $19.68. That’s a gain of 6.3% over the last trading week. We’ll have to wait until Friday to see if it can take the Alpha title again this week.

Finally, we’ve got Global Water Resources Inc. (GWRS). Global Water Resources is a water resource management company that owns and operates water and wastewater utilities in metropolitan Arizona. As of September 30, 2018, the company owned twelves water and wastewater utilities.

The company has a unique strategy that it refers to as “Total Water Management”. This is the term that the management uses to describe the plan of managing the entire water cycle by owning and operating the water, wastewater and recycled water utilities within the same geographic areas.

This strategy conserves water and promotes sustainable communities in the areas that the company serves. What that boils down to is the basic premise that the world’s water supply is limited.

All three of our companies have a slightly different way to look at the solution to this scarcity. And in the end all companies need to survive. It’s not really about the competition here. Water utilities have the areas that they operate in. It’s more about continuing to improve efficiency so that the company can continue to make more money.

Shares opened last week at $9.85 and closed for the week at $10.49. That’s a gain of 6.4% over the last trading week.

All three companies saw gains in share prices last week. Our algorithm said they are the ones to watch this week as well. We’ll check back in Wednesday with our mid-week update.

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