Thirsty for returns? Consider Xylem and Primo Water

By:
on Mar 26, 2024
Updated: Mar 27, 2024
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  • Global water scarcity fuels conflicts, expected to worsen with increasing stress.
  • 2.2 billion lack safe drinking water; 3.5 billion lack sanitation.
  • Xylem and Primo Water: 2 stocks showing bullish trend currently.

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The UN World Water Development Report 2024, unveiled on March 22, underscores a troubling reality: mounting global water scarcity is driving an increase in conflicts across the globe. This worrisome trend is anticipated to escalate further as more regions worldwide experience heightened water stress.

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According to the report:

“As of 2022, 2.2 billion people were without access to safely managed drinking water. Four out of five people lacking at least basic drinking water services lived in rural areas. The situation with respect to safely managed sanitation remains dire, with 3.5 billion people lacking access to such services. Cities and municipalities have been unable to keep up with the accelerating growth of their urban populations.”

To emphasize the looming water crisis, Statista has developed an infographic utilizing projections from the World Resources Institute (WRI). According to this data, by 2050, 51 out of 164 countries and territories analyzed are projected to experience high to extremely high water stress, impacting approximately 31% of the global population.

Infographic by Statista

In light of the growing concerns surrounding global water scarcity, investors are turning their attention to companies positioned to tackle this pressing issue while delivering promising returns. In this article, we shine a spotlight on two such stocks – Xylem Inc. (NYSE: XYL) and Primo Water Corporation (NYSE:PRMW).

Xylem

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Xylem is a global leader in water technology, known for designing and making top-notch products for critical uses in water and energy. Their expertise spans from delivering clean water to treating wastewater, all while focusing on making water systems more efficient and affordable.

In their 2022 report, Xylem highlighted their wide range of solutions aimed at tackling water scarcity, ensuring resilience, and keeping costs down across the entire water cycle. From start to finish, Xylem’s goal is to ensure water is managed sustainably and returned safely to the environment.

XYL chart by TradingView

Xylem’s stock has been steadily rising since around mid-2015, when it was priced at about $30 per share. This upward trend continued until it reached a peak of $138.78 in August 2021. However, there was a short-term drop in the stock price, bringing it below $80.

But things took a turn with a recent rally that started in October 2023. During this rally, the stock broke through its medium-term downward trendline and the symmetrical triangle pattern. Currently, the stock is trading at its highest levels in the past year, and there are no signs from any indicator in the long-term charts that it will reverse course soon.

This suggests that the stock could keep climbing higher, with its previous peak of $138.78 being the main obstacle in its path.

Primo Water Corporation

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Primo Water Corporation specializes in delivering water solutions tailored for both residential and commercial needs. Their product range encompasses everything from bottled water to dispensers, filtration units, and coffee, all designed to ensure access to pure hydration.

Operating various esteemed brands like Primo, Alhambra, and Crystal Rock, the company offers a diverse selection, including premium spring water and flavored essence water, catering to different consumer preferences.

Primo Water Corporation has recently shifted its focus towards the North American market. This strategic move has yielded promising results, evident in consecutive quarters of positive growth.

PRMW chart by TradingView

Like Xylem, Primo’s long-term charts also show strong bullish momentum, breaking out from a symmetrical triangle pattern.

Primo’s shares embarked on an unprecedented bullish trajectory from mid-2013 to mid-2018, delivering a staggering 20x return over that five-year span. Following a peak surpassing $20 in August 2018, the stock entered a prolonged downtrend, bottoming out at $6.63 amidst the onset of the COVID-19 pandemic in March 2019.

Since then, Primo has resumed its upward trajectory, nearly breaching the $20 mark in November 2021, albeit falling short. However, after breaking above the symmetrical triangle pattern in its long-term charts, the stock has experienced a rapid rally, propelling it back to the vicinity of $20 where it currently hovers.

Just like Xylem, Primo’s technical indicators on long-term charts don’t suggest a reversal, and short-term indicators reinforce the ongoing upward momentum. Should the stock breach its previous double top of $20, expect a rapid rise to even higher levels.

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