For a brief period on Saturday the streets of downtown Boston turned into raging rivers.
The flooding was so bad it forced the shutdown of a subway station and several major restaurants in the area.
Water even entered a major natural gas main, causing nearly 1,000 people to be without gas and hot water.
The flood was not caused by some freak meteorological event. It wasn't even raining in Boston on Saturday.
So what caused this freak flooding of Beantown?
It was a water main break. And a fairly large one.
I'll get into the lucrative investment potential associated with water infrastructure stocks in a minute. But first, it's important to get a grasp on what's going on with all those pipes beneath the surface.
Water Infrastructure Breakdowns
The pre-dawn rupture occurred in a 12-inch water main in Boston's financial district.
And I'm guessing this incident only garnered so much attention because of the location in which it occurred.
You see, water main breaks have become commonplace lately.
In fact, just this week, water mains in London, Austin, Toronto and San Diego have endured similar plights. And those are just the incidents in cities large enough to be mentioned by just one name.
Small towns like Windsor, North Carolina and Parker, Colorado have also experienced water infrastructure breakdowns this week.
Oftentimes—and I'm quoting stories from multiple instances: "The cause of the water main break was unknown, officials said."
That's nonsense.
Even I know the reason for the water main breaks. They're old.
While being old may not be the technical term for water main failure, it is certainly the main driver behind most water main issues.
Technically speaking, water mains fail for one of four main reasons:
tuberculation (the accumulation of rust, minerals, etc.)
faulty or deteriorated joints
inadequate hydraulic capacity
internal/external corrosion
But no matter the cause for water main failure, the result is always the same. They need fixed or replaced.
Water Main Replacement: A Boon to Water Infrastructure Stocks
In fact, the Environmental Protection Agency (EPA) recently estimated that $374 billion will be needed over the next 20 years for water main replacement and renewal. That works out to about $18 billion per year.
The problem: we currently only spend about $1.1 billion per year.
But that spending is growing at a 25% annual clip and is expected to continue to do so for the immediate future.
This is clearly going to create a bull market in the water main replacement and refurbishment industry. The only thing left to know is how to play it.
The way I see it, there are a few ways to go about it.
The most obvious way is to invest in pipe manufacturers.
Two of my favorites in the space are Northwest Pipe Company (NASDAQ: NWPX) and Ameron International Corporation (NYSE: AMN).
Both of those companies offer broad exposure to the pipe market and will see increased business as a result of water main replacement.
The second way to play this phenomenon is through pipe refurbishment and maintenance companies.
A company called LB Foster Co. (NASDAQ: FSTR), through its Tubular Products division, offers various preventative and repair products for water transmission systems, including specialty coatings for corrosion protection.
All three of those companies are well-established and the stocks should offer great upside potential as evidence of a real water infrastructure crisis continues to emerge and accumulate.
Call it like you see it,
Nick
P.S. Now that the Green Chip Water Index is a success—it's up 32% since 2007—I've decided to recommend water-related companies in my new service, Alternative Energy Speculator. Besides the companies mentioned above, I've got my eye on a company that can replace water mains without even digging them up by using trenchless technology. You don't want to miss this recommendation.
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