LATE TO THE PARTY
by John Dickerson, President & CEO
Summit Global Management, Inc.
April 15, 2005
Sector Rides a Wave of Strong Demand
"Surge in Need for Fresh Water, Upgraded Infrastructure Buoy Shares, Earning for Providers"
Wall Street Journal, Friday April 15, 2005
Comment: Once again, popular journalism is late to the party. Lately there has been a spate of articles on the water industry in the popular media, and at least to us, that's probably a sure sign of an intermediate top in the group. We would note that, of all the stocks mentioned in the Wall Street Journal article, we have owned each in the past and have sold every one of them because we consider them to be trading at prices that cannot be justified by the fundamentals of the underlying businesses.
Good values are still available when following the water theme on an international basis, but investors should be very skeptical of suddenly-popular water stocks trading in the US market. The time to buy is when nobody wants them, but when everybody seems to be talking about a group as the '"next big thing," it's probably time to move away until the crowd loses interest and moves to the next popular group.
The long term fundamentals in the water sector are superlative; current prices for domestic stocks are way ahead of themselves.
© 2005 John Dickerson