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Water Companies Have Global Growth Potential: Analysts

Tuesday, 4 Jan 2011 | 4:22 PM ET

When you think about water in terms of the Dow Jones Water Index, which is lower than it was five years ago, investing in the liquid doesn’t sound promising.

But Neil Berlant, a partner at Crowell, Weedon & Co., and John Quealy, a managing director and analyst at Canaccord Genuity, told CNBC Monday that investing in water is a growth move.

Betting on Liquid Assets
How to invest in water, with Neil Berlant, Crowell, Weedon & Co., and John Quealy, Canaccord Genuity.

“Much of that industry, from a stock market point of view, has been outstanding,” said Berlant, who forecast that water prices will rise three to five times in the next three to five years.

“We are going to have to see a transformation of the pricing metrics and people going to price water on a real cost basis, which is what it costs to find it, treat it, and then deliver it—and that isn’t the way it has been done historically.”

In the area of desalination, there’s growth potential even in the U.S., which ranks No. 2 in the world in consuming the water. “Companies such as Energy Recovery has mastered the ability of significantly reducing the cost of desalination,” said Berlant. “So we’re looking at a boon.”

Quealy said that the population shift to places where there’s not a lot of drinkable water is changing the dynamics of water as a commodity that will eventually command market prices.

He said China, India and Latin America present the best opportunities for water works, but that there are opportunities in the U.S. as well.

Quealy's Recommendations:

Nalco Holding —his "favorite" water company

Elster Group —a "buy"

"Holds" on the following:

Badger Meter

Pentair

Insituform

Tetra Tech

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CNBC Data Pages:

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Disclosures:

Disclosure information was not available for Berlant, Quealy or their respective companies.

Disclaimer

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