Blue Gold...Still Shining

About five years ago, I launched my investment service, Mayer’s Special Situations with a special report, entitled Blue Gold.

The report laid out the compelling long-term case for investing in water-related stocks. The stocks I recommended in that report have performed extremely well, far outpacing the S&P 500 Index. But the investment backdrop for the water sector has become even more compelling today than it was five years ago.

Nalco Holdings (NYSE:NLC), a water treatment company I recommended in the Blue Gold report has been an excellent performer. It is up about 60% since my recommendation, while the S&P 500 has gained no ground whatsoever. I expect this long-term outperformance to continue. Recently, The Financial Times interviewed CEO Erik Fyrwald, who had many interesting comments.

Fyrwald began by saying that water was the “No. 1 issue facing the world.” A few good excerpts:

“I travel about 50% of the time, often into the developing markets, such as China, India, parts of Africa, that are not only water starved today, but increasingly water challenged… their water consumption is rising, while they are water challenged already, and that makes a huge challenge for them…

“I have been going to China and India for 20 years, and 20 years ago – even 10 years ago – the focus on water was minimal. Water treatment and recycling didn’t exist significantly. It was there for industrial global companies that built operations in China or India. But the Indian companies, the Chinese companies, weren’t concerned about water, either cleaning it up for effluent or recycling it. Today, I can tell you that leading Chinese companies and leading India companies are very concerned about water and are starting to adopt very advanced techniques for both cleaning up the water and also the recycling and reuse of the water. That is why we are seeing tremendous growth in those countries…”

Sitting right there in the sweet spot of the Asian water story is Hyflux Ltd., another company I recommended in my report. The stock has done very well, and a big part of the reason is the company’s CEO, Olivia Lum.

She won Ernst & Young’s World Entrepreneur of the Year 2011. Her story is amazing.

She turned the mere $15,000 she started with into one of the largest water treatment companies in the world. The Financial Times profiled her, and included more personal details that I didn’t know.

For example, she was adopted at birth and lived with four other orphans in a tin-roof shack in Kampar, Malaysia. She avoided becoming a child laborer – the fate of many – at the peanut factories and rubber plantations. Instead, she sold papaya from a stall and paid for her own textbooks and bus fare to school. She went on to college in Singapore to study chemistry. Her job out of college was at GlaxoSmithKline, where she studied water treatment. To start Hyflux, she sold her car and small house.

It’s a remarkable story. And her company still is a great investment, as it has huge opportunities in China and India and across the Middle East and North Africa.

Nalco and Hyflux are two of the best companies in what may prove to be one of the very best investment sectors for the next five or ten years.


Chris Mayer,
for The Daily Reckoning

The Daily Reckoning