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The Next 100-Bagger is Hidden in “The Big Short”

The Next 100-Bagger is Hidden in “The Big Short”

Chris Campbell

Posted September 18, 2023

Chris Campbell

Recall the hit movie, “The Big Short.”

The film masterfully unravels Burry's contrarian bet, which netted him close to $1 billion amidst the 2008 housing debacle.

Yet, you might recall, it ends on a mysterious -- and a bit harrowing -- note:

“Michael Burry is focusing all of his trading on one commodity: Water.”

Back then, it sent the financial Interwebs abuzz.

One decade and some change later…

This is still the case.

Commodities like oil, cotton, or silver, have established markets where they're actively traded.

But water? It stands apart.

There's no bustling exchange floor, no ticker tape running with prices.

In short, Burry's investment thesis raises more questions than answers.

Let's dive in.

The Water Wars

You’ve probably already heard the arguments…

The U.N.announced the potential of a 40% shortfall in fresh water supply by 2030.

They point out that our planet guzzles more than 4 trillion cubic meters of fresh water annually.

Sure, they say, 71% of Earth is covered in water. But a meager 0.65% is what we humans use for our needs. And a huge portion of this is needed for cooling electric power plants and irrigation.

They also point to the American Southwest's lifeblood, the Colorado River, which has been seeing reservoirs like Lake Mead and Lake Powell dwindling.

Fast.

A mere 25% remains, from a robust 95% at the turn of the millennium.

Brad Udall, a water and climate scientist, paints a bleak picture. The Colorado River crisis is so dire, he says, Lake Mead and Lake Powell are unlikely to refill in our lifetimes:

"To think that these things would ever refill requires some kind of leap of faith that I, for one, don’t have."

However, where there's a crisis, there's also opportunity.

The Opportunities

This doesn’t have to spell doom.

For starters, if you think water scarcity is a limiting factor on food production, just look at Israel and the Netherlands.

Israel applies water and fertilizer through drip lines, saving 90% of water and fertilizer and making previously unusable farmland usable. And the same in the Netherlands, they also reduced water and fertilizer usage by 90% with greenhouses and other innovations.

Also, don't forget the covert operations and technological advances of the US government.

The CIA's Operation Popeye, for instance, allegedly manipulated weather during the Vietnam War.

Tech has allowed us to "create" rain, a fact often swept under the rug.

Matthew Diserio, a bigwig at Water Asset Management, dubbed the U.S. water industry the next gold rush.

Again, the question beckons: How to invest?

With enough due diligence and luck, one can acquire water rights and lease or sell them to industries or municipalities.

Publicly traded water utility companies offer direct access to the market, while businesses that focus on infrastructure, such as pipes and filtration systems, represent the backbone of water distribution.

For those keen on innovation, there's potential in companies pioneering water purification, desalination, and conservation techniques.

Agriculture-oriented investors might explore water-rich farmlands, especially in areas cultivating water-intensive crops. To diversify, one can opt for Water Exchange Traded Funds (ETFs) or mutual funds centered on water-related stocks.

Also, municipal water bonds and Real Estate Investment Trusts (REITs) related to water properties offer other ways to invest.

As always, the team is on the case scouting out specific -- and high-profit -- opportunities.

Stay tuned for more.

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