An Infrastructure Pick That’s Critical To Our Most Important Commodity…
Last week, I told you about my experience during the unprecedented snowstorms in Texas. And I also shared some thoughts on how extreme weather events like this are changing the thinking of not only governments and voters, but also companies and investors.
This leads me today to tell you about something else that should be on your radar. It’s called “ESG” investing.
If you’re not familiar, that’s okay. It stands for “environmental, social, and corporate governance”.
You’re going to be hearing more and more about it in the months and years ahead.
My colleague Nathan Slaughter recently wrote about the “green wave” of spending that’s about to take place. That’s part of the ESG equation. This green wave is going to create demand for a whole host of commodities and services – and we’re going to have a lot more to say about it in the weeks to come. For now, just know that it’s going to be partly fueled by the new administration in the White House, partly by insatiable demand from China, and partly by a lot of well-intentioned investors and entrepreneurs.
But let’s not mistake things, the ESG ball has been rolling since about 2005. And momentum has been picking up steadily for a while… It’s a fairly broad term, and it could cover anything from renewable energy to sustainable farming to electric vehicles to hazardous material cleanup and more.
There are a few areas of ESG that are worthy of consideration – but there’s one that’s got my attention right now.
Can you guess what it is? Think back to all those poor folks in Texas that I mentioned with frozen pipes…
I’m talking about water.
An ESG Pick You Should Consider
Now, I’m admittedly a bit of a prepper. (But hell, if what happened to us in Texas combined with Covid didn’t make you a prepper by now, I don’t know what to tell you…) So when our neighborhood was put on a “boil water” notice, we were ready for it.
But I think it’s safe to say that most Americans take their water for granted. You turn the nob and water comes out. That’s it.
According to the World Health Organization (WHO) at least 2 billion people use contaminated drinking water. It causes more than 485,000 deaths each year. By 2025, they estimate that half of the world’s population will be living in what it calls “water-stressed” areas.
But it’s not just far-flung places that need clean water. America’s water infrastructure is in terrible shape. The American Society of Civil Engineers issues periodic report cards on various critical infrastructure categories – and drinking water gets a C-. Barely passing.
I’ll spare you the details – for that, you can read the report here. But suffice it to say it’s going to take hundreds of billions of dollars to get everything up to snuff.
That’s where Xylem (NYSE: XYL) comes in.
Cities and states around the company are going to rely on the company to do the hard work of rebuilding their aging water and wastewater infrastructure. How do I know that? Well, they’ve been doing just that for years…
With three operating segments (Water Infrastructure, Applied Water, and Measurement & Control Solutions), it’s the largest company of its kind in the world. It operates in more than 150 countries.
I could run you through a litany of instances of local governments calling Xylem when disaster strikes. Hurricanes, contamination outbreaks, critical systems failures, you name it. But they also help prevent disasters from happening in the first place.
Xylem believes its total addressable is about $500 billion. This is a fragmented industry, and Xylem only captures just 1% of that, so there’s a lot of room for growth – either organically, or through acquisition.
We’ll have to leave things there for today. Not every issue will be this long, but I wanted to start things off right and give you something to think about. In short, a new commodities boom is already beginning – and ESG is an investible theme worthy of your consideration.
There will be more to say about themes like this – and more – in the days ahead.
By the way, my colleague Jimmy Butts gets credit for the Xylem pick. Put it on your radar.
In the meantime, Jimmy and his team just released his list of “shocking” predictions for 2021…
If you want to know what the biggest investing themes of the year (and beyond) are going to be, then you need to check it out. You’ll discover the shocking reason we believe violence in Peru could push one $2 stock north of $40… how a revolutionary breakthrough in air travel could make early investors rich… and the “odd” reason one small group of mining stocks could soar in the coming months (they’ve done it before – more than once).