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Diving Into The Deep End With Water Utilities

Only 11 investor-owned water utilities remain in the United States. Water utilities offer a steady income but increases in revenue often must be negotiated with regulatory bodies. CTWS and others have used acquisitions as a means to ensure growth amidst a regulated pricing environment. Descriptions ARTNA AWR CTWS CWCO CWT Yearly Forward Dividend 0.89 0.90 1.07 0.30 0.67 Yield 3.43% 2.16% 2.9% 2.57% 2.99% Payout Ratio 68.55% 52.46% 50.76% 63.31% 55.94% 5 year Div Annual Growth 3.3% 10.50% 2.33% 1.39% 2.02% Over the past five years AWR has seen impressive dividend growth, allowing it to beat the S&P 500. The rest have fallen short but in the process have offered nice yields that have continued to rise, albeit at a modest clip. SPY data by YCharts Artesian Resources (NASDAQ: ARTNA ) is the largest investor owned water utility on the Delmarva Peninsula and eighth largest in the US. It serves 301,000 people with 82,900 metered customers, producing 7.6 billion gallons per year. There is 1,201 miles of main, 5,827 fire hydrants and 69 treatment facilitates. The average residential water service cost for customers is $1.57 per day. Source: ARTNA Investor Relations Website Artesian invested $23.7 million in infrastructure improvements in 2014. American States Water Company (NYSE: AWR ) is a public utility holding company that owns 100% of its subsidiaries, Golden State Water Company and American States Utility Services, Inc. GSWC is a regulated water utility servicing 258,000 customers in California and electricity for 24,000, also in California. 75 cities are served with 38 water stations. ASUS offers contracted water and waste water services. Presently nine military bases water needs are being provided by ASUS with more active bids taking place and have the potential to be awarded in the next 5 years. Many of these contracts with military bases are 50 year contracts. 60% of AWR’s water supply comes from groundwater and 35% from Metropolitan Water Districts and its member agencies (mostly from the Colorado River). Source: AWR Investor Relations Website For the last two years AWR has instituted stock share repurchases each amounting of up to 3.2% of total outstanding shares. Connecticut Water Service Inc. (NASDAQ: CTWS ) is a regionally focused, regulated water utility. In addition to coverage in Connecticut, CTWS also owns the Main Water Company that covers small regions of Maine. There are 123,000 utility customers, 2,100 miles of pipe, 239 wells, 25 surface water supplies providing 176 million gallons per day. Source: CTWS Investor Relations Website CTWS’s strategy for growth is conservative acquisitions, such as two Maine water companies in 2012. Consolidated Water Co. Ltd. ( CWCO ) is a company focused on the business of seawater reverse osmosis desalination plans and water distributions in the Caribbean across 14 plants with a production capacity of 26.4 million gallons per day. Source: CWCO Investor Relations Website As of last quarter, CWCO plans on beginning the process of assisting in building another plant costing $600 million, this time in the continental United States. CWCO will take a minority position in the plant and will assist in operating it. This plant will be in Rosarito, Mexico and will serve Tijuana, Mexico’s 1.8 million people and San Diego, California’s 3.1 million. California Water Service Group ( CWT ) is the third largest investor-owned water utility in the US and provides water utility services for customers in California, Washington, New Mexico, and Hawaii. In these states CWT serves more than 2 million people through just shy of 500,000 customer connections, 95% of which are in California. Source: CWT Investor Relations Website In 2014 CWT invested $132 million in capital improvements and received authorization from regional governments to increase their rates, yielding $45 million in new revenue.

Take Your PIIC – Philippines, Indonesia, India Or China

Summary Consider to invest in Asia. Within Asia I believe the best countries to invest in are the Philippines, Indonesia, India, China and Vietnam. All have high growth driven by domestic consumption. All except China have incredibly low household debt to GDP compared to their Asian peers, which will allow them to easily borrow more and build more. The “Asian Century” has arrived and if you fail to invest in it you are missing an enormous long-term opportunity to grow your wealth. In this article, I discuss what I believe to be the top five Asian destinations for investment and why. But first, why invest in Asia? The answer is simply because it is growing more rapidly than any other continent on the planet. By 2030, Asia Pacific is estimated to contribute a staggering 59% of global consumption , up from 23% in 2009. Some key points from DBS on where Asia is heading in the next 25 years: · Asia adds a Germany (in economic terms) every 3.5 years, and will add three Europe’s in 25 years (by 2040), or if Asian currencies appreciate one to two percent pa (as is the norm for developing economies), Asia will add 5 or 6 Euro zones by 2040. · The Asian middle class is set to triple (to 1.8b) in size between 2015 and 2020, and to have increased 615% (6.15 fold) between 2009 (525m) and 2030 (3,228m). · China (59%) and India (16%) will dominate the Asian middle class. · For every addition to the US population, Asia’s headcount will rise by seven. · China’s growth is moving inland, and also towards Central Asia. · Capital will flow to Asia like never before. Why? Businesses want to be where the growth is. Ever hear one say different? In 2039, when Asia has added three Euro zones, it will be creating a Germany every seven months. That’s a pretty big attraction. Inflows mean currency appreciation. Asian currencies will rise against the dollar, euro and yen. · China’s per-capita energy consumption is one-eighth what it is in the US, India’s is one-twentieth. Rising incomes mean Asia’s energy demand will continue to soar. Asian, not G3 demand, will drive the price of energy. Source The World’s largest economies in 2010 and 2050 Source You can read more about the rising Asian middle class in my previous article here . Why Philippines, Indonesia, India and China? I choose these as my top 4 Asian countries to invest because they have high growth (domestic driven), low household debts (see chart below), and a rising middle class (with jobs and wage growth). The best time to buy is ideally when valuations are good (PEs below 15), or dollar cost averaging. Source No1- Philippines The Philippines’ main advantage is their cheap, young and skilled labour force with excellent English skills. The BPO industry is growing around 20% pa (it grew 18.7% in 2014). The Philippines is currently growing around 5.6% pa (with a long term growth rate estimated at 7.3% pa), with the main growth drivers being overseas foreign worker’s remittances, and the BPO (call centre, back office administration) industry. Tourism, manufacturing (electronics, ship building), mining and farming also contribute. This money is being channeled into the property sector, combined with increased lending (household debt is a mere 6% of GDP). Demographics are excellent with around half the population below 25, and salaries are rising at least 6.5% pa, or higher in the BPO industry where staff are paid sign on bonuses. The property boom can run for many years as pent up demand for housing is huge and prices are still low at just USD 3,156 psqm or less in Manila. The banks are making good net interest margins around 3.02 %, and growing their loan books 20% pa, with non-performing loans at a very low 1.8% and double digit profits. Investors can buy iShares MSCI Philippines ETF (NYSEARCA: EPHE ), currently on a PE of 21.17 as of 30 September 2015. No 2 – Indonesia Indonesia has a huge population with strong demographics, a rising middle class, and improving Government. Indonesia GDP was 5.0% in 2014, however it is expected to average 6.8% pa in the long term (see table below). Along with Philippines and India, it has very low household debt, and rising employment and wages. The new Government seems focused to reduce debt and build infrastructure. In October 2015, they announced a USD 5 billion high speed railway from Jakarta to Bandung in a JV with China Railway Group (00390:xhkg) (PE 10.1). Property prices are low at just USD 2,766 psqm, and rising . Investors can buy iShares MSCI Indonesia ETF (NYSEARCA: EIDO ), currently on a PE of 18.19 as of 30 September 2015. No 3 – China China is off course the booming manufacturing hub of the World, but is changing to be a more consumer led economy. This is causing a slowdown in fixed asset investment, and the so called “China slowdown” and “commodities rout”. Their GDP is currently 7.0% and slowing. Demographics and household debt levels are not so good; however, the rising middle class is still huge. The best way to play China is to buy into the consumer sector via a fund or individual stocks. A suitable fund would be db x-trackers CSI300 Consumer Discretionary 1D ETF. Chinese (Shanghai, Beijing) property is not as expensive as India (Mumbai), and is priced at USD 6,392 psqm. Investors can buy iShares MSCI China ETF (NYSEARCA: MCHI ), currently on a PE of 14.56 as of 30 September 2015. Another good choice is db X-trackers Harvest CSI 300 CHINA A-Sh ETF (NYSEARCA: ASHR ). No 4 – India India has perhaps the best growth potential but is expensive on current valuations (PE around 30), so best to wait for opportunity to buy in or average into the market over time. Current GDP is around 7.3% pa, and the long term average is expected to be around 8.0% pa. Indian labour is cheap with strong English and IT skills. Property is growing but expensive in the major cities such as Mumbai at USD 11,455 psqm, which may be a drag on the short term growth (as in China). By 2050, India is expected to be the World’s largest economy (see earlier table). Investors can buy iShares MSCI India ETF (BATS: INDA ), currently on a PE of 30.75 as of 30 September 2015. No 5 – Vietnam Vietnam is my preferred short-term pick as PEs are around 13, so great value now. Long term its prospects are also good, as it is a cheaper manufacturing hub to China and jobs are booming as a result. Household debt is low at around 20% to GDP. Investors can buy db x-trackers FTSE Vietnam ETF (GR). I would avoid Malaysia (household debt to income of 146% ) and Thailand (debt 121% ), based on high personal debts and economies that are heavily dependent on exports. Many frontier markets will also offer good returns for investors but perhaps at greater risk, so invest accordingly. Other high growth countries (listed below) to consider are Nigeria, Iraq, Bangladesh, Vietnam, Mongolia, Sri Lanka and Egypt. Source : Finally, for those that want something different, then consider to invest in either Pakistan (PE 9.2) via db x-trackers Pakistan (03106:xhkg), or Central Asia and Kazakhstan via Global X Central Asia & Mongolia Index ETF (NYSEARCA: AZIA ) (PE of 16.7), as China is pushing infrastructure and growth in that direction.

3 Of Seeking Alpha’s Best, Part III

Summary As a hedge fund manager, who do I think is worth following on SA? 3 (more) writers I take seriously and think you should too. This is the third in a continuing series. In Part I and Part II , I looked at six of Seeking Alpha ‘s best contributors. In this sequel, I offer three more worth following. I follow them closely and recommend that you do too; you will learn and profit from their expertise. Mike Winston Mike is a great idea-generator and friend. I interviewed him for my blog and listen carefully to his ideas. He is an expert on Yahoo! (NASDAQ: YHOO ). If you are interested in the Yahoo! stub, check out Yahoo’s Cashless Spin-Off Has Strong Business Purposes: Employee Options And Merger Currency and The Yahoo Tax Myth . Heath Winter Heath Winter is a former colleague and longtime friend. He is particularly expert in options strategies around merger arbitrage. You should read all of his ideas, but one that appears to remain a particularly attractive opportunity today is OmniVision Technologies A Top Opportunity In The Merger Arbitrage Universe . OmniVision (NASDAQ: OVTI ) has a $1.04 net arbitrage spread, which offers a 12% annual return if the deal closes by next February. Jeremy Raper Jeremy Raper is responsible for some terrific investment ideas on both the long and short side. One portfolio overlap of ours has been Avolon (NYSE: AVOL ), which he discussed in Avolon: Growing, Underfollowed Business At Steep Discount To Comps, 40%+ Upside , Avolon Update: Impressive Q1 Execution, Valuation Gap Vs. Peers Will Continue To Narrow , and in his Quick Update On Avolon . The $0.52 net arbitrage spread offers a 4% annual return, if the deal closes by next March. Another idea worth studying is Monster Worldwide (NYSE: MWW ), which he presented in Monster Worldwide: Frightening History, But The Only Thing Scary Now Is The Upside . This stock has generated significant interest on Sifting the World . You are also welcome to follow me and my investment ideas here . I do not claim to be one of Seeking Alpha ‘s best, but I stumble upon a misplaced bet from time to time. Here is a bit more about me in case you are interested. About the Author I began my career conducting public policy research and investigative work on behalf of hedge funds and proprietary trading desks impacted by government and political risks. My research for clients such as leading hedge funds and banks included regulatory and antitrust analysis, as well as litigation and legislation tracking. This work provided actionable intelligence and risk assessment. I founded Rangeley Capital in 2007 in order to exploit the seams between other hedge funds’ mandates. Such situations include broken deals, volatile corporate transactions, and securities that are hard to hedge. Rangeley enters positions with DC risks where spreads have blown out more than is justified by analyzable exposures. The goal is to buy at discounts to the value of probability-weighted outcomes. The intention is to always underpay. Today, Rangeley owns a portfolio of event driven value investments. Positions are taken in order to maximize the expected value of our portfolios. They are sized to account for liquidity and downside. Rangeley’s Special Opportunities strategy launches in January 2016 under the leadership of Andrew Walker . Andrew focuses on small capitalization, under analyzed opportunities that lack a natural investor base capable of correcting mispricing. You can read about Rangeley’s past and our future . If you are an accredited investor who wants to learn more, please contact my colleague Rob Sterner at resterner@rangeleycapital.com for details about Rangeley Capital and our upcoming fund launch. If you would like to consider becoming a member of Sifting the World , just send me your e-mail address and I would be happy to offer you additional information about joining.