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Natural Resources

A Pall on Pollution

By Gary Scott

Natural Resources

Water covers 70% of the Earth’s surface and is a natural resource that we dare not deplete. Without water, life cannot exist. Without clean water, life cannot exist well.

Water pollution is an enormous problem that creates huge opportunity.  

There are two types of water pollution, direct pollution and non- direct. Direct sources of pollution occur when harmful substances are spilled directly into a body of water, such as an oil spill.

Non-direct pollutants come from indirect sources such as fertilizer run off and air deposition (gases and particles that are carried through the air and fall into water such as acid rain).

Many causes of pollution including sewage and fertilizers contain nutrients such as nitrates and phosphates. In excess levels, nutrients over stimulate the growth of aquatic plants and algae. Excessive plant growth clogs the water, uses up oxygen and blocks light to deeper waters. This harms aquatic environment, the fish, everything that resides in water and destroys the eco system.

Non-direct pollution also includes pollution silt from soil washoff, plowed fields, construction, logging, urban areas, and eroded river banks. There is also a normal aging process that slowly fills bodies of water with organic matter.  Other forms of non-direct pollution includes sewage, leaves, grass clippings and runoff from livestock feedlots and pastures.

Pathogens are another form of non-direct pollution including bacteria, viruses, and protozoan from storm drains, septic tanks, runoff from farms and boat sewage.

Other forms include chemicals, petroleum, radioactive substances and heat from global warming and industry.

The main sources of non-direct pollution are municipalities, industry and agricultural industry. 

One company that has been providing water treatment facilities to the industrial arena and is expanding into municipalities is Pall Corporation.

Dr. David B. Pall started the Pall Corporation in 1946. Today the company is a $1.9 billion science-and-engineering business with 10,400 employees worldwide.  The company is listed on the New York Stock Exchange (NYSE:PLL).

The firm began marketing one of Dr. Pall’s early inventions, a porous stainless steel filter. Today the firm specializes in filtration and complementary technologies serving medical and biopharmaceuticals, general industrial, aerospace and microelectronics.

At first glance I liked the potential of this firm because of the increasing importance of filtration in water treatment. The only investment I have made to date in the water industry is in Hyflux another company specializing in filters. 

Both companies have developed an assortment of proprietary membranes that can separate, selectively capture, or remove very small virtually undetectable contaminants. Pall filters remove bacteria, viruses, and molecules down to the angstrom level (one hundred-millionth of a centimeter). Pall has a line of smart filters that stop specific contaminants but let desirable components remain in the water.

Pall is the largest industrial purification and filtration business for many fluids in the world and is now focusing more on water. The company has had a water filtration operation for 40 years and has recently merged its water membrane filtration expertise with its large-scale experience and capabilities to expand into municipal and government services.

Pall now earns $350 million in its water division, the fastest growing part of its income.

The company has trade marked the words “Total Fluid Management” to describe the idea of blending filters, separation equipment and services for cost lowering efficiency.

Pall went public in 1957, when 20,000 shares were offered $5.00 per share. There has been substantial growth since. Sales fourth quarter ending July 2005, were $524.5 million. Earnings were $43.4 million or 34 cents per share.

In July 2005 shares price ran up to a high of $31, then fell to the $25 range, but have since recovered to $27 per share.

I have been writing about the potential of investing in water for a number of years but feel like a babe in arms when looking at the potential of the water sector. There is so much to learn! It is a crying shame that water pollution is such a huge field, one more sign of humanity’s short sighted thinking when it comes to growth, lifestyles and industrialization.

But unfortunately this opportunity does exist and our financial support in this arena is vital. This is a sector where investment opportunity and the survival of society as we know it come together. There are so many places where one can invest in water treatment that the options are almost bewildering.

But I already like Pall Corp. because it is an industrial giant focusing on cleaning water. Water pollution is one of the world’s biggest problems. There is an old British saying “Where there is muck, there is brass”. There is plenty of muck in the world’s water supply so perhaps there will be more brass (or maybe even gold) to make with shares of Pall Corp. and companies like this.

I expect that working through the water opportunity learning curve will lead more than once to Pall Corporation and perhaps buying some shares.  Let’s keep an eye on Pall Corp.

Until next message, may all your investments and water be clear!

Gary

Natural Resources
December 8, 2005
Natural Resources

 

 

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