In an uncertain world, long-term investors take a lot of time trying to understand and nail down exactly where the world is headed 10 or 20 years from now.
Iconic investor Dr. Michael J. Burry from the blockbuster movie The Big Short has been involved in trading water of late, as indicated in the credits at the end of the movie. Mr. Burry seems to be relatively in tune with long-term trends, leading other long-term investors to do their homework on water and water-related businesses that may profit in the future from a water shortage or lack of infrastructure related to increased water needs.
The fact that the global demand for water is increasing at a pace more than double that of population growth should not be surprising. It is in finding adequate investments that can give a long-term investor exposure to these water assets where it can get tricky.
Enter: Algonquin Power & Utilities Corp. (TSX:AQN)(NYSE:AQN). Of the large Canadian utilities companies, Algonquin has some of the best and most sought-after water utilities of the bunch, making this company's valuation seem much more pricey than other comparable names.
I have always taken the view that cheap does not equate to value, and in Algonquin's case, even though the multiples may seem extravagant, the long-term upside Algonquin provides investors 10 or 20 years from now may make an investor looking back blush at the opportunity to jump in at today's levels.
