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Water: The Next Oil?

By Dr. Steve Sjuggerud
Friday, January 27, 2006

40.7 percent...

That’s the median gain on my longtime friend Dan Denning’s recommended list.

Dan is the editor of the newsletter Strategic Investment... he and I met about a decade ago. Back then, we were both no-name newsletter writers with big ideas. We hardly had any subscribers, but we tried hard and we delivered the best ideas we could to our handful of readers.

Our fortunes have improved dramatically in that decade, and we’ve added more than a few readers. We must be doing something right. But we’re still the same guys just chasing ideas...

On that chase, I’ve moved to Australia for a few months, to be close to where the action is now – in commodities and in Asia. (Dan beat me here... he moved to Australia a few months ago.)

I talked to Dan yesterday. He had lots of big ideas as usual. But his biggest investment idea of 2006 is something you may not have ever thought of... water. Specifically, water fit for drinking.

Dan says: “until recently, no one seemed to worry much about where fresh water is going to come from in the future for mining, agriculture, drinking or hygiene... 97% of the world’s water simply isn’t usable for human beings to drink. The future is that fresh surface water is going to be more and more valuable as it gets more and more scarce.”

I’ve heard this before. Our mutual friend Rick Rule has been talking about the investment potential of water for a long time... and Dan’s found a great new way to make an investment here.

To own the world’s supply of drinking water (as best as we can), we can simply buy the Water Resources Portfolio from PowerShares. And it trades just like a stock.

Dan says “a full slate of water utilities are also included among the holdings, with other water treatment and service companies rounding out the rest of it... For the simplest way to be “long water” in 2006, this is it”

It’s a great idea.

Most readers of my newsletter True Wealth are already familiar with PowerShares, a relatively new family of investment vehicle. They give you an easy way to buy a group of stocks in just one security.

A handful of my recommendations last year were PowerShares for different sectors, like biotech and semiconductors. I like the fact that no stock can make up more than 5% of a PowerShares portfolio. And the portfolio of 35 stocks is rebalanced every quarter, so it kicks out the dogs as necessary. There are a lot of other unique features of them beyond these, which you can learn about at

Getting back to the story... “Is water the next oil?” Dan asks. He answers his own question: “Well, natural gas might give water a run for its money. But I predict that by the end of the year, water is not only going to be a major geopolitical theme, but a major investment theme, too. Now is the time to buy.”

As I mentioned, Dan’s favorite play here is the PowerShares Water Resources Portfolio (PHO).

The Dan I know is as honest and as smart as they come. I don’t think the 40.7% median gain on his recommended list is a fluke.

If this water play is Dan’s favorite idea for 2006, it’s probably worth a serious look...

Good investing,


Market Notes


While we’re on the subject of water investment, it’s fitting to mention how much cash can be made with a microcap stock in the right industry.

With 60% of revenue coming from water-related services like well drilling, water treatment, and water pumping, microcap Layne Christensen Co. (LAYN) has enjoyed a large increase in business and stock price over the past three years.

Layne’s 239% return since 2003 has far exceeded the 104% return of the water stock benchmark Palisades Water Index (symbol $ZWI on during the same time.

Layne Christensen’s three-year performance:

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