Raymond James Energy Stat of the Week
by J. Marshall Adkins
Energy Stat: California, Flint, Gujarat, Cape Town - Unlike Peak Oil, Water Scarcity Is Going Global
February 20, 2018
As recently as the beginning of this decade, the theory of fossil fuel scarcity - ''Hubbert's Peak'' / ''Peak Oil'' - was central to how we, and the market, thought about investing in energy. To state the obvious, that's in the rearview mirror. But there is an emerging scarcity theme that is making headlines around the world - and it looks much more durable. We are referring to water scarcity, amply illustrated in recent years (and even weeks) by crises in the U.S., India, and South Africa. Today we will review several of the high-profile case studies and explain why investors looking at natural resources should not overlook the most important resource of all.
Here are three key thematic points. First, water has no substitutes - making it fundamentally less cyclical than the energy sector. Second, water scarcity is a structural long-term trend that is not linked to geopolitical issues, though it can be exacerbated by flawed public policy. Third, investing in water infrastructure needs to be seen in the context of a small number of publicly traded pure-plays. This creates scarcity value (pun intended) in the few stocks that are available: including, within our coverage, AquaVenture (mid-scale desalination and bottleless filtration), Evoqua (water treatment systems), and, to a partial extent, Itron (water metering).
This is a summary of a much more detailed commentary. Please contact your financial advisor for the full report.
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