"Blue Gold"

An investment in "blue gold" is not only very valuable from an ecological point of view, but can also be worthwhile for an investor in terms of returns.

Although 70 percent of the earth is covered with water, drinkable fresh water is only available to a very limited extent. In contrast to a raw material such as oil, blue gold cannot be replaced by anything for humans. With a growing world population and the progress of climate change, the importance of the raw material vital to humans is increasing from year to year.

That the supply of drinking water is one of the key tasks of the 21st century. century, is also becoming more and more evident in the financial markets. The World Water Index has gained 29 percent since the beginning of the year, the price increase of the last three years amounts to 91 percent. The index shows the 30 largest companies in the world that are engaged in water infrastructure, treatment and supply - at least 40 percent of sales must be generated with water-related business units. And on the CME futures exchange, in addition to commodities such as gold, oil, cotton, wood or wheat, there has also been a futures contract on water since the end of 2020.

The social importance of water and the value of companies active in the water sector are likely to continue to increase in the future. The OECD predicts that water demand will increase by 35 percent by 2050 - due to the growing population and changed eating and living habits. In the industrialised nations, the outdated systems must be replaced. And in emerging countries, there is increasing investment in the development of the basic water and wastewater structure.

Investors have opportunities to invest in innovative and sustainable water technologies and at the same time achieve high returns. The water market is also crisis-proof, as water is always in demand regardless of the economy. These stocks have long-term potential:

Veolia - Drinking water giant

Founded in 1853, the French company Veolia Environment (EPA: VIE) focuses on the areas of water and wastewater, waste disposal and energy production. With 315,000 employees in 48 countries, the company supplies 100 million people with drinking water. Veolia is one of the leading companies in its field with a market capitalisation of around 19 billion euros. The shares have already added 47 percent this year. This significant increase was supported by a record result in the first half of the year. In addition, the planned takeover of domestic competitor Suez was welcomed favourably in the markets. The transaction should be completed before the end of the year.

Veolia's business with seawater desalination plants is particularly promising for investors. Countries such as Israel, Brazil or Spain rely on this technology, the states on the Arabian Peninsula anyway. With a price-earnings ratio (P/E ratio) of 32 and a dividend yield of 2.5 percent, Veolia is considered a defensive basic investment among water stocks. And the majority of analysts surveyed by Bloomberg recommend buying the shares. The average price target of twelve months is 32 euros, which corresponds to an upside potential of 13 percent.

Lindsay - Irrigation systems for agriculture

Around 70 percent of the water used worldwide is consumed in agriculture. Especially in this area, the waste of water is particularly high. The efficiency of the water used in agriculture is below 40 percent worldwide. Around 60 percent of the water could therefore be used either for additional cultivated areas or for other purposes.

The US company Lindsay (NYSE: LNN) is one of the pioneers in irrigation systems in agriculture. The company generates around 80 percent of its turnover with its irrigation technology. The remaining turnover comes from the infrastructure division, where movable guardrails, road safety and guidance systems are developed and marketed. Stocks have risen sharply since the beginning of the year. After several months of sideways, the title has gone down since the end of August. Nevertheless, this year's price increase amounts to 13 percent.

As early as 2030, it is estimated that farmers will have to provide 8.5 billion people with food. Since the resource of water will remain scarce, agriculture must increase its efficiency. Thanks to rising prices for agricultural raw materials and food, they also have more investment capital available again. Companies like Lindsay benefit from this in the long term. For example, the financial service provider Stifel (NYSE: SF) also expects the stock to reach a price of 178 dollars to twelve months - an upside potential of 23 percent. Due to its low market capitalisation of 1.6 billion dollars, fluctuations are not unlikely. The stock is therefore more suitable for nerve-racking investors.

Xylem - Water technology

The US company Xylem (NYSE: XYL) describes itself as the world leader in the field of efficient and sustainable water technology. The shares only moved upwards in 2021 until the end of August. Despite the strong correction in September, this year's price increase amounts to 27 percent. Xylem is valued at a good 23 billion dollars on the stock exchange.

Xylem's business areas include water and wastewater transport, treatment of water and wastewater, analysis of water quality, process optimisation and pipeline condition analyses. Heat exchangers, agitators and filter systems for water purification as well as pumps for water transport are also on offer. The product range also includes sensor-controlled and software-based technologies for reducing water loss, as well as technologies for the more efficient handling of wastewater.

Until the corona crisis, Xylem recorded almost double-digit growth rates in sales and profit. According to analysts, the pre-corona level of sales is to be reached at 5.3 billion dollars as early as this year. And in 2023, sales are expected to rise significantly again to 5.7 billion dollars. Despite its high P/E of 61, the high-growth company offers great long-term potential and belongs to the purchase list.

Ecolab and Tetra Tech - Service providers for the water industry

The US company Ecolab (NYSE: ECL), based in St. Paul in the state of Minnesota is a service provider for water-intensive industries. Ecolab manufactures washing machines and dishwashers, cleaning systems, measuring and dosing systems. In addition, the company has detergents and cleaning agents as well as chemicals in its program. The customer list ranges from laundries to industrial groups to hospitals and restaurants. The cleaning solutions help to save water, energy and cleaning agents. However, the company supplies the fracking industry with chemicals, which may be a reason for exclusion for some investors.

With 49,000 employees worldwide, 9400 patents and a market value of just over 63 billion dollars, the company is the world market leader in the cleaning business. A large part of Ecolab's sales are attributable to recurring revenues, which makes sales and profit predictable. Shares of Ecolab have moved sideways in big swings this year - plus 2 percent since the beginning of the year. With a P/E of 61, the title is highly rated. The majority of analysts surveyed by Bloomberg therefore classify the stock as "hold" - only buy from price resets.

The US company Tetra Tech (NASDAQ: TTEK), on the other hand, specialises in planning, analysis and engineering services around the topic of water infrastructure - including sewers, sewage systems, pumping systems and dams. Other areas of expertise of the company are civil protection, waste disposal, renewable energies and pollutant removal from contaminated soils.

As with Ecolab, Tetra Tech is not an investment for everyone: The company offers services for mining companies, the oil industry and the US armed forces.

Since the beginning of the year, the shares have gained 43 percent in value and have not shown any weakness recently. Tetra Tech has a market capitalisation of almost 9 billion dollars. The title is not a bargain with a P/E of 47. However, a purchase is not daring for price resets, the company had rising profits and sales in the past with the exception of the corona year.

Water ETF

For investors who want to spread the risk more widely with an ETF (Exchange Traded Fund), the "Lyxor World Water UCITS ETF" (WAT.MI) comes into the first choice. The reference index is the World Water Index mentioned at the beginning. The total return on the ETF has been up to 26 percent since the beginning of the year. The fund volume amounts to around 1.2 billion euros.

In addition, the 2.5 billion dollar "iShares Global Water UCITS ETF" (IH2O.L) is also available. The water ETF invests in the 50 water shares shown in the S&P Global Water 50 index and has increased by 25 percent since the beginning of the year.

Disclaimer - this is not an investment advise but an idea. The companies or ETFs are used for information purpose only. Should you invest in those it is at your own risk.