6 stocks for the drought of 2014

Companies that provide services related to water resources and firefighting will be in the spotlight as the disaster imperils the West.

By Traders Reserve Jan 24, 2014 10:48AM

The dry Arkansas River bed in Garden City, Kansas (© Adam Reynolds/Corbis)By Karen Riccio

 

There's one thing even drier than the soil, reservoirs and mountains in the 12 states declared natural disasters by the U.S. government last week: the budget needed to deal with all the repercussions of severe droughts, including the imminent wildfires.

 

This drought is making history, so there's no telling what the final price tag might be.

 

A lack of water makes it nearly impossible to grow crops without the help of costly irrigation systems. So, farmers suffer.

 

Sparse snow packs keep reservoir levels far below normal, forcing state officials to speed up lengthy projects to update water infrastructure and creative pumping solutions. So, cities suffer.

 

Through August 2013, 33,000 wildfires spanning 5,300 square miles destroyed 960 homes and 30 commercial buildings at a cost of nearly $1 billion. Now that round two is underway, federal, state and local governments desperately need firefighting equipment and manpower. So, homeowners and fire crews suffer too.

 

It's particularly hard when natural disasters strike, whether they come fast and furious like Hurricane Sandy or the Northridge Earthquake, or slow and subtle like droughts. There are no winners. However, when companies supply services or products to help counter the devastating effects of disaster, the investment community calls that opportunity.

 

Companies involved in the business of farming, water efficiency and firefighting are sure to be affected. Here are five stocks to watch.

 

Irrigation

Here are a couple of that provide irrigation equipment to the heartland, specifically as it relates to efficiency. Every drop counts during a drought and Lindsay (LNN) and Valmont Industries (VMI) both manufacture irrigation equipment for more than two-thirds of the U.S. harvest as well as in key regions in Australia, Africa and Canada.

 

Although a combination of increased rainfall in some regions and higher crop production didn’t bode well for either company in 2013, each added about $45 to their stock prices in 2012 when the drought took hold.

 

Water equipment

As states, especially California, try to solve the long-term water shortage problem, water utility companies and equipment providers should be getting quite a few calls from Gov. Brown and Co. Here are a few in the small-cap arena: American States Water Company (AWR) is a public utility company that purchases, produces, distributes and sells water in California. The $526 million serves approximately 250,000 water customers. Franklin Electric (FELE) designs, manufactures and distributes groundwater and fuel pumping systems, electronic controls and related parts and equipment. Consolidated Water Company (CWCO) uses reverse osmosis technology to produce fresh water from seawater.

 

Firefighting equipment

The federal government just announced that it will allot $3.9 billion to California to fight wildfires in 2014. Some of that may very well go to: Erickson Air-Crane (EAC), the builder of Aircrane helicopters with 2,650-gallon fire suppression systems and detachable water tanks. It just entered into a multi-year, $60 million contract with National Aerial Fighfighting Centre in Australia, another continent under fire. It is also the largest provider of heavy heli-tanker aircraft to the U.S. Forest Service. In Sept. 2013, Air-Crane signed a $5.6 million contract to manufacture fabricated aircraft assemblies for a unit of United Technologies (UTX). Prior to that EAC entered into a five-year agreement with Los Angeles County, valued annually at $2.7 million.

 

More from Traders Reserve


 

12Comments
Jan 24, 2014 1:02PM
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It's as clear as a bell. Even the market bandwagon riders have to see this. The bull market was all BULL. As soon as they even elude to the tiniest pullback in money printing (AKA the dow jones hedge fund manager welfare program), the propped up stock indexes all tank. This is the new castrated USA. How pitiful.
Jan 24, 2014 1:59PM
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"... expectations grew that the Federal Reserve will trim its market-friendly stimulus measures further."  Is this (finally) an admission that QE 1...1,000 counterfeit money has manipulated the market for 7 years?  $7 trillion of fiat money has easily purchased 10,000 points on the stock market. 
Jan 24, 2014 12:50PM
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fire.  the west will continue with them. 

 

and water is gold. 

 

 

Jan 24, 2014 1:24PM
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Is there just some kind of human suffering ETF I can buy?

Jan 24, 2014 1:22PM
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Like we said yesterday after the close, manipulators would want to repeat and that is exactly what they are doing, we are opening up with these scumbags in complete control and selling...Forget the earning reports, doesn't matter how good they are they will sell anyway.....Don't forget, that is how these crooks steal their money...Will be another tough day...Remain on the sidelines and watch these cheaters do their thing for now...More later.
Jan 24, 2014 1:55PM
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Being a Texan, I have known for decades that water is always important and that it would become more precious. T Boone Pickens has been talking about it and T Boone puts his money where his mouth is. It is time for El Nino to return to the Pacific.
Jan 24, 2014 2:19PM
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The Writing's On The Wall:  "Street"


This Ride's Over:

It's not the end of the world it's the end of the "Bull Market" for now


Every small-time investor should be running to their computer or calling their broker and cashing in their stocks. Those in the "Know" are already selling their shares .. The First Out Wins the Most..


We called this one for September of 2013, but the "Companies of Wall Street" kept buying back their own stock and the Government kept printing large tracks of monies and the Bonds were bought by the thousands.


I ask you to take a good look at your "Stock Sheets". Are those stocks worth what your listings say they are?


Is Costco worth $146.00 or is it worth $65.00, what about J.P. Morgan "Chase" when all the fines are paid out and the CEOs have cashed in their shares "as fast as they can" where will the market list them at..


It was a great ride and those who get out now will be telling their grandkids about the money they made on the "Stock Market Run they lived through and made Bank"..




Jan 24, 2014 2:04PM
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When our market closes today the markets move East - to the "emerging markets" that are crashing.  Hold on to your hat when the markets open Monday.
Jan 24, 2014 1:33PM
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The "Golden Calf" will have nothing to eat.
Jan 24, 2014 3:31PM
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Wouldn't ag commodities do well on a warming planet?  Food will get scarce even if demand remains the same. 
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