Been researching water names for over 2 years now. It's not easy to find a winner because the industry is highly fragmented. I like ideas like consumables (water testing \_ Idexx or Ecolab) but water is a small part of Idexx and Ecolab is a mix - not going to make money on that idea. ERII invented the razor but forgot about the blades - they will fail. I like DD filters but they aren't alone in this space....and also there are some developments with graphene that are interesting and could evolve filters. So where are you gonna make money in water? Desalination? Maybe...but it's super expensive and takes time...water reuse > desalination. I love Badger Meter BMI, as you know, the water meter is the cash register of the water utility; however, this is a project based business and they are seeing a lot of delays - I like this because I read that more as "pent-up demand" - but I think BMI can fall much further, I wouldn't sniff it over 107 right now. The name I am buying right now is Core & Main - water distribution, infrastructure - pipes, meters, filters - mainly sold to municipalities - this is the US water supply chain.
I believe water will come into focus soon enough. Like BMI, CNM is seen some impact from delays but it's minimized at the distributor level. I like buying supply chains right now as they get disrupted - if your business if dependent upon global events right now, good luck. I want to own THE supply chain. I think we have a plethora of water maintenance projects, water reuse projects and probably new business with data centers and new power infrastructure. Founded in 1874, this company is built to last. Top 3 shareholders increased positions last quarter. 20% ROE 15% ROC, Depreciation is 4x capex. 10x net income in 5 years. Buying back shares.
Valuing this at past 2 years avg FCF of 3.12 x 18.5 pFCF (which implies 5% growth if you know your Graham compounding chart) = 57.72 Fair Value, w/ 20% margin of safety that's a buy at 46.18 or under. Priced at this moment is $42.93.