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Savings Experiment: Snow RemovalThis post is part of a special report, A Dozen Ways to Play an Obama Building Boom.
"Stocks in the water sector could soon flood their shareholders with a deluge of profits," says value investor Nathan Slaughter. In his Half -Priced Stocks, he explains, "Even in the 21st century, UNICEF reports that a staggering 1.1 billion in emerging markets still lack access to safe drinking water.
"And here in the U.S., the EPA has said we need to spend $275 billion to replace aging facilities -- including 800,000 miles of leaky, corroded pipeline that haven't been upgraded since the 1800's in some places.
"We see an incredible opportunities for the companies trying to combat the problem, particularly those involved with water distribution pipes, treatment facilities, purification technologies and other critical infrastructure.
"My top play in the sector is Veolia Environnement (NYSE: VE), a global juggernaut with $45 billion in annual revenues, operating on every continent.
"From humble origins supplying water to Parisians over 150 years ago, Veolia has grown to become the world's largest water utility. Today, it provides water and sewerage services to 130 million people in nearly 60 countries worldwide.
"The shares have been pummeled lately over reduced earnings guidance, deferred projects, and indigestion from several recent acquisitions.
"But I see this sell-off as a prime buying opportunity. The current economic slowdown in Europe has taken a toll on the firm's industrial waste collection business, but the overall outlook for the company is highly compelling.
"Thanks to its global footprint and proven expertise, Veolia is often the go-to company for municipalities or other government agencies looking for a reliable partner to outsource critical water infrastructure projects. And because the firm often signs long 20-year contracts, its revenues tend to be sticky and recurring.
"The shares are trading at just two times cash flow -- a highly attractive multiple for a global leader with good earnings visibility and strong growth prospects.
"Veolia is an excellent option for investors seeking exposure to this powerful theme. The shares are an attractive buy below $40, which would still represent an appreciation potential of 33%. And of course at its current price level, triple-digit gains are possible."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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