blue gold & special situation investing by chris mayer editor & founder mayer ’ s special...
TRANSCRIPT
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Blue Gold & Special Situation Investing
By Chris Mayer
Editor & Founder
Mayer’s Special Situations
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Globally, the water crisis is here
Half of all hospital beds in the world are occupied by sufferers of a water-borne illness.
Only 20% of the world’s population has regular access to clean water
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China’s Thirst…
2/3rds of its 600 largest cities don’t have enough water
Half have polluted groundwater Highest liver and stomach cancer rates
in the world
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High economic costs, too
$54 billion per year, 20% of GDP Top environmental priority Beijing – clean up by 2008
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Physical versus Economic Shortages Cherrapunji, India versus Australia Difference between access and an
actual physical shortage. Not all about population. Water use in the U.S. stopped rising in
1980 (Segerfeldt) Efficiency gains – Steel production, for
example.
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A Crisis of Governance
Water crisis in the developing countries stems from under investment, lack of free enterprise.
Spillage issues Chile example Price of water
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Water: Source of Conflict
“The wars of the 21st century will be fought over water.” (Serageldin, WB)
“During the past 50 years, 507 conflicts have arisen from disagreements over water.”
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Huge Investments Needed
Long-term neglect Currently $70-80 billion in developing
countries. World Water Council estimates $180
billion per year is needed over the next 25 years.
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Massive Consolidation
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Water Pumps
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Irrigation Companies
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Long-term growth drivers…
Population growth Need for productivity improvements Fresh water constraints Irrigated water makes up 17% of
acreage, contributes 40% to food supply
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More drivers…
Depends on farmer income, crop prices – to a certain extent
Backdoor play on ethanol Replacement market (50% are over 10
years old) 30% of sales from overseas (China,
India, Brazil, South Africa
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Healthy company…
Has some cash, no debt Buying back stock – 325,000 shares in
2005 23% increase in sales 94% increase in earnings Not a single analyst follows the stock
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China Exposure & More
Growth in China – also India, Brazil, Russia
Broad-based water treatment company Energy business Paper business Bread & butter is WATER
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Durable business
“Whether a plant is running at 50% or 99% capacity, it must still run its boilers, cooling systems, and power generators.”
Recurring revenue streams, long-standing customers.
Pricing power Interesting history
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Special Situation Investing
What is it? Spinoffs, recaps, stubs & lots more…
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Walter Industries (WLT)
Real time example Play the “stub.”
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Thank You!
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