Nathan Slaughter

People want gold and oil. These commodities have long been synonymous with wealth.

But they need water. It's something every one of the world's seven billion-plus inhabitants needs every day for basic survival.

In the not too distant future, the wealth of some nations could be measured more by water than crude.

Drought-ravaged regions around the world are wrestling over water rights, rationing and other such issues.

Few people realize it, but drinking, bathing and other residential uses account for only about a tenth of all water consumption. Industrial applications use twice as much. And a whopping 70% of consumption is channeled toward agricultural uses. It takes 1,000 tons of water to produce just one ton of grain.

There isn't always enough to go around, and water resource management is becoming a major issue -- one that spells opportunity for investors.

Consolidated Water Company (Nasdaq: CWCO) has a tight grip on water distribution throughout half a dozen Caribbean nations. The company was granted its first public utility license in 1979 to serve residential and commercial customers in the Cayman Islands. In the past decade, a series of acquisitions has expanded the base of operations from Belize to Bermuda.

In the Bahamas, Consolidated Water owns and operates a massive desalination complex with the capacity to produce 12 million gallons of pure drinking water per day. The company also has a stake in an affiliate that supplies water to the governments of Tortola and Jost Van Dyke in the British Virgin Islands.

Combined, the firm manages 14 desalination plants throughout the region that pipe 26.8 million gallons of clean water each day to homes, businesses, resorts and government-owned utilities.

Consolidated Water is one of the world's most experienced practitioners of seawater reverse osmosis technology. In comparison to the traditional thermal distillation process, seawater reverse osmosis is a radically different way to extract salt.

The process removes salt from water by pressurizing saltwater and then passing it through a special filter that doesn't let the salt through.

The end result is the same. But seawater reverse osmosis is preferable from an investment standpoint over distillation, because the process is more energy efficient, which means lower costs (and wider profits) for every gallon of water produced.

Consolidated Water doesn't spend too much time worrying about demand or searching for new customers. Why would you, when you're the only one selling a product that everybody is buying?


Nathan Slaughter

Nathan Slaughter is Chief Investment Strategist of Market Advisor, Scarcity & Real Wealth, and Energy & Income at StreetAuthority.com.
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