Jim Rogers is a man well known for his strong opinions, direct manner and accuracy. Although sheepish at times regarding his “market timing” skills (he routinely says he’s a “terrible market timer”), his record tells a different story. As a partner of legendary billionaire investor George Soros at the Quantum Fund, Rogers made a fortune during the 1970s by investing in commodities. Rogers co-founded the Quantum Fund in 1973 and during the following 10 years, the portfolio returned a staggering 4,200%.

In 1980, at the age of 37, he left the Quantum fund, went into semi-retirement and embarked on a decade-long investigation into investment opportunities worldwide. His adventures were documented in books after two trips around the world: one on a motorcycle, the other in a specially-designed car.

Rogers has published other books as well, most notably Hot Commodities, in 1999. In it, he alerted readers to the opportunities he saw in commodities well before commodity investing through exchange-traded funds (ETFs) and mutual funds became commonplace. His timing couldn’t have been better.

He later penned A Bull in China, a book which delivered Roger’s opinions on the tremendous opportunities for investors in China, which was based on his experience in the country. Rogers’s attitude toward Asia and the growth opportunities there is so certain that he moved his wife and two young daughters to Singapore. He is raising his children bilingually, speaking both English and Mandarin Chinese. His company, Rogers Holdings, manages exchange traded notes (ETNs) which track commodity indexes and can be bought on most major stock exchanges.

Roger’s accuracy and foresight have kept his visibility high and maintained his reputation as a “legendary” investor. He stands firmly in the belief that commodities and foreign investing in some emerging markets are still the best investment choices. He dislikes India, which he says won’t be recognizable in 30 to 40 years, and he is a bear on the dollar, tech stocks and the euro.

But there is one investment he has increasingly spoken about during the past few years where he has put his money to work: water. 

Blue gold
Water is an interesting thing. Most people don’t seem to consider where it comes from or how to get it. It’s just always there when we turn on the faucet. But water is difficult to get in many parts of the world. And like oil fields that can “dry up,” there are underground water sources that do the same.

Imagine how life would change for us if we turned the faucet on and nothing came out. This is a frightening but real possibility. The World Bank reports that 80 countries now have water shortages, while 40% of the world has no access to clean water or sanitation. About 95% of the world’s cities still dump raw sewage into their waters.

A prime cause of the global water concern is the ever-increasing world population. As populations grow, industrial, agricultural and individual water demands escalate. The World Bank also tells us world-wide demand for water is doubling every 21 years and even more quickly in some regions. Water supply cannot keep pace with demand, as populations soar and cities explode. Since 1900 there has been a six-fold increase in water use for only slightly more than a three-fold increase in population size.  The United Nations predicts world population will increase 50% by 2050, from 6 billion today to 9 billion.

Desertification and desalination
Land degradation in many countries is accelerating, leading to a condition known as “desertification,” which is the transformation of once arable land to desert. This can be caused by a number of things including drought, deforestation or inappropriate agriculture. Industrial farming and over-extraction is rising in many areas of the developing world, leading to increases in the amount of salt in the water and decreasing water quality. The process of lowering salinity levels is called desalinization. There are approximately 11,000 desalination plants in 120 nations in the world, 60 percent of them in the Middle East. This is an area of the water industry which is likely to grow in the future.

Rogers is not the only high profile figure who sees a great future in water. Bill Fleckenstein, hedge fund manager and president of Fleckenstein Capital, has invested in land with an independent water source. Hedge fund manager Michael Burry,  subject of the best-selling book “The Big Short” by Michael Lewis, has been quoted as saying “I believe that agriculture land — productive agricultural land with water on site — will be very valuable in the future.”

Action to Take –> Invest in water. Most of us cannot buy thousands of acres of land but can certainly invest in the companies, ETFs and mutual funds that will profit from the water challenges in our future.

Here are a few options…

1. PowerShares Water Resources ETF (NYSE: PHO) — This ETF tracks the Palisades Water Index and 90% of its assets is normally invested in American depositary receipts (ADRs) and common stocks of companies in the index. The index includes companies involved in the provision of potable water, the treatment of water and the technology and services that are directly related to water consumption.

2. Companhia de Saneamento Basico (NYSE: SBS) — Companhia de Saneamento Basico do Estado de Sao Paulo (Sabesp) is a Brazilian company that provides sanitation and sewage treatment services, and supplies treated water in the city of Sao Paulo. The company provides urban rainwater management and drainage, urban cleaning, solid waste management and related services.

This stock is a play on water and emerging markets. Brazil is prospering and is likely to continue to see its citizens become more productive and wealthier. The demand for services Sabesp provides should increase. The stock also yields 4%.

3. Calvert Global Water A (Nasdaq: CFWAX) — This fund is focused on companies either in the water sector or that are significantly involved in water related services or technologies. The fund is actively managed, which means the fund management team is making subjective decisions regarding the companies owned by the fund. This is in contrast to an index fund, which merely tracks the stocks included in the index. However, the fund’s annual expense ratio of 1.85% is higher than the average index fund and it also has a front end sales charge, the fee you pay to buy in, of 4.75%.

Ultimately water will continue to be a significant challenge and may be a much bigger problem in the future, which is why now is the time to invest in the companies that can provide solutions.

P.S. — Few investors realize that a 20-year energy agreement between the United States and Russia is about to expire. This deal supplies 10% of America’s electricity. As broke as our government is, the situation is so serious that President Obama is asking for $36 billion to avert this crisis. And Republicans support him. Here’s what’s going on…