This will be a small longer than usual, but I find the subject interesting. Introduction is necessary, but my concrete conclusions/notices are inactive there. Let's have a discussion.
Water for decades has been treated as apparent good - available, inexpensive and inexhaustible. Meanwhile, the planet is increasingly entering an era where water becomes 1 of the most strategical natural materials. Drought, increasing population, urbanization and environmental degradation make fresh water resources shrink faster than we can renew them. Already today, more than 2 billion people are surviving in regions affected by chronic water deficits, and another countries are starting to treat access as a national safety issue.
As a result, water becomes an asset. A natural material whose value grows with global scarcity. For investors this means another area to invest: from water resources management companies, infrastructure operators, to companies with ]]>water rights]]>.
The subject of water has late gained any attention due to the U.S./Israel War vs. Iran. Water in the mediate East is 1 of the quietest and at the same time the most crucial factors that form the political and economical situation of the region. Although the public debate is dominated by oil, religion or rivalry, it has been the water deficit that has influenced the decisions of the states, the tensions between them and the direction in which full societies develop. The mediate East is the world's driest region, and its fresh water supply shrinks faster than the increasing demand. As a result, water becomes not only a natural material, but an influence tool, an component of strategy and 1 of the foundations of national security.
This is very clear in relations between countries. Turkey, controlling the sources of Euphrates and Tiger, has been utilizing the strategy there for years to strengthen its position towards Syria and Iraq. Israel, Jordan, and Palestine have been negotiating access to the Jordan River for decades, and the aquifers of the West Bank, for without them it is impossible to keep agriculture or supply cities. The Gulf countries, almost completely devoid of natural resources, have become dependent on desalination of seawater, making their infrastructure highly delicate to conflicts and attacks.
Water becomes 1 of the key elements of the mediate East geopolitical puzzle. It is not as spectacular as oil or as media as armed conflicts, but it mostly determines the limits of the capabilities of states, their dependence and their future.
Direct investment in water seems intuitive, but in practice it is highly difficult. Water cannot simply be "buyed" like oil or gold. Water laws are highly local, dependent on the laws of individual states or regions, and their valuation can be opaque. ETFs, which many investors treat as vulnerability to this natural material, actually invest mainly in infrastructure companies - water supply companies, tube manufacturers, pumps or filtration systems. It's an investment in the sector, but not in the water itself. In turn, the water futures are not liquid (on the margin, it sounds comic in the context of water :) and do not reflect the real market, making them hard to treat as a tool for the long-term allocation of capital.
Instead, 1 can consider a strategy that at first glance may seem unobvious, but is highly logical. ]]>Best way to invest]]> In water there seems to be investments in food, which requires immense amounts of food, and at the same time can be easy transported. alternatively of buying water, you buy farmland in places where access to it is inexpensive and stable. On specified land, food with advanced added value can be produced, the production of which absorbs large amounts of water - and then sold to regions where water is lacking. In practice, this means ‘exporting water’, but in the form of agricultural products.
Examples of specified crops are very specific: almonds, nuts, vegetables with advanced marketplace value. They are products that require immense amounts of water to produce, but at the same time are light, durable and easy to transport. B
The full strategy is based on the presumption that water is simply a local resource and food is simply a global resource. It doesn't make much sense to send a water tanker from California to the mediate East, but you can send almonds that needed thousands of liters of water to grow. It's pure economical "water arbitration".
Conclusions / observations
1. In practice, it is hard to get vulnerability to companies that would be listed on the stock exchange, which would make it easy to carry out specified an investment.
2. There is simply a REIT agrarian Funds Group (RFF), which may be an interesting form of indirect investment in water. Rather, it is an vulnerability to agriculture + water rights + irrigation infrastructure.
Rural Funds Group is an Australian agricultural REIT that has land, agricultural infrastructure and water rights. In Australia, water is simply a regulated and traded resource - rights to it are valued, sold and leased.
RFF has immense areas of agricultural land - about 740,000 hectares - which it allocates to crops specified as almonds, macadamia, vines and cotton. Water rights are besides a key component of the portfolio, importantly expanding land value and allowing unchangeable agricultural production in Australia's dry climate. The company generates gross from both the long-term lease of land and the sale of yearly water allocations, making its model of action a applicable implementation of the thought of "investment in water through food", only in the form of the REIT listed on the stock exchange.
However, it is REIT and REITs are a circumstantial asset class. I don't think it's the best choice, but I'm dropping it off, even as a curiosity.
3. Water speculation - here I wanted to bring you 2 interesting companies: Limoneira and Boswell.
Limoneira is simply a 132-year-old American agribusiness company from California, listed on Nasdaq (LMNR). At first glance it looks like a simple maker of citrus and avocados, but in fact it is 1 of the most interesting water companies on the market, due to the fact that it has a immense portfolio of water rights, which it evaluates and actively coines.
Below is simply a illustration of the company's quotations. What is conspicuous - her quotations decision in a certain channel and regularly appear on it increases / drops bounded by this channel.
J.G. Boswell Company (ticker: BWEL) owns any of the largest private water rights throughout California, and according to any analyses even across the United States. These water rights are the main reason why the company has been curious in investors seeking vulnerability to water as natural material for years.
Here, the graph looks different, but I might be tempted to conclude that we have a channel that sets any feedback points here.
Summary
The investment in water is simply a subject that is alternatively niche, but comes back from time to time, especially erstwhile the communicative begins to dominate subjects suggesting water shortages, e.g. like now ]]>in the context of the mediate East]]> And the marine water desalination infrastructure there. I am constantly looking for something that would let effective long-term vulnerability to water (not so much in the mediate East context, just water has good prospects). At the moment, I have only these 3 assets, which in my opinion are not suitable for long-term investment. Boswell and Limoneira are alternatively interesting companies in the context of speculation. I'd like to know your opinion and your ideas.
]]>How to invest on the stock market? Free investment tips]]>
Author: ]]>Konrad Parsley]]>
