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FROM CHAOS TO CASH: A STOCK THAT LEVERAGES EXTREME WEATHER

By John Persinos • July 7, 2023 • Stocks to Watch

Printable PDF

Scientists reported this week that the earth experienced its hottest day on
record, three days in a row. These are not milestones to celebrate. The human
race faces an existential crisis.

University of Maine researchers announced that the entire planet sweltered under
its hottest day ever on Monday, July 3. The record was broken the next day.

On Monday, the average global temperature reached 17.01 degrees Celsius (62.62
Fahrenheit), the highest in human record-keeping. On Tuesday, it rose to 17.18
degrees Celsius. The previous record of 16.92 degrees Celsius was set in August
2016.

The average global temperature hit a record high for the third day in a row on
Wednesday, tying Tuesday’s average.

Heatwaves, wildfires, storms, and droughts are plaguing the world. The latest
headlines tell the grim tale.

In the U.S., a heatwave is punishing Texas and the South, with
triple-digit-Fahrenheit temperatures and high humidity. Europe is baking under a
heatwave as well. Wildfires in Canada are sending toxic smoke into the skies of
America. Floods are inundating India. Extreme drought is afflicting the horn of
Africa. And you can be sure that the planetary record for hottest day will get
broken again…and again.

Below, I pinpoint an environmental remediation company that’s well-positioned to
profit from these regrettable but relentless trends.

Disaster capitalism…

Climate change is increasing the frequency and severity of extreme weather
events. Enter Tetra Tech (NSDQ: TTEK), a leader in helping public and private
sector organizations cope with various types of environmental challenges. Those
challenges are only getting worse, which means that demand for the company’s
services are only getting stronger.

Europe has been particularly hard hit by climate change. According to data
released June 27 by research firm Statista, there’s been a dramatic increase in
extreme weather events and natural disasters across the European continent since
1923.

More than 1,500 severe weather events, including droughts, floods, heatwaves,
and storms, have occurred in Europe over the past 100 years, with two thirds of
them having taken place since the turn of the century (see chart).



With clients around the world, Tetra Tech turns weather chaos into cash, while
at the same time helping people and the planet.

With more than 20,000 full-time employees worldwide, Tetra Tech provides
engineering and technical services for the water, energy, infrastructure, and
natural resources sectors. The company specializes in risk mitigation and damage
control related to climate change.

As environmental disasters grow in frequency and intensity around the world,
Tetra Tech is the “go-to” environmental company.

Headquartered in Pasadena, California, Tetra Tech’s services are sought by
commercial and governmental decision-makers who find themselves on the front
lines of crisis. Environmental and humanitarian catastrophes wrought by climate
change are vivid examples.

Hurricanes and cyclones are making vast swaths of coastline non-insurable.
Whether the culprit for the emergence of freak “super storms” is man-made
climate change or natural cycles, severe and unpredictable weather is a new
global reality that governments appear helpless to prevent. That makes Tetra
Tech the beneficiary of a secular megatrend.

The era of water scarcity…

Tetra Tech also is a play on the global water crisis, as pollution,
overcrowding, urbanization, and the heightened frequency of droughts make
potable water an increasingly scarce and valuable commodity. Unsafe water
sources are responsible for 1.2 million preventable deaths around the world each
year.

Read This Story: 2 Agricultural ETFs for a Soylent Green World

According to recent studies by the scientific journal Nature, the world’s stores
of groundwater, which accumulate over millennia in aquifers, are vanishing at an
alarming rate. The result is persistent demand for reliable sources of clean,
potable water.

According to the consultancy Global Water Intelligence, there’s a huge gap in
the U.S. between expected expenditures and actual needs for water infrastructure
(see chart below, with years 2022-2040 as projections):

The American Society of Civil Engineers (ASCE) recently released its report card
for America’s infrastructure, a comprehensive assessment of 17 major
infrastructure categories compiled once every four years. The nation’s grade
point average this year: C-. Ordinarily, a weak grade would be disappointing,
but for investors, it’s actually good news.

The ASCE found that the country’s total infrastructure needs over the next 10
years total nearly $6 trillion, but after considering various sources of
committed funding, the gap to meet those needs is $2.59 trillion.

President Biden in 2021 signed a $1 trillion infrastructure bill, which invests
in roads, bridges, railroads, water systems, and other projects. The massive
federal funding already is providing more work for Tetra Tech. Infrastructure
spending enjoys a bipartisan coalition of support, because it entails state and
local spending that both red and blue states require.

It all adds up to huge, long-term demand for Tetra Tech’s highly specialized
services. In the meantime, Tetra Tech continues to pick up lucrative contracts
from federal and state agencies for environmental remediation.

With a market cap of $8.7 billion and several quarters of robust operating
results under its belt, Tetra Tech possesses the financial wherewithal to
aggressively compete in the construction bidding wars that typically emerge in
the wake of natural disasters. It’s also poised to pick up a big slice of new
infrastructure spending, in the U.S. and overseas.

Unlike its peers, Tetra Tech’s core competency is remediation and risk
management, making it a purer play on these incidents as well as a company with
more room for growth. By way of contrast, major competitor Fluor (NYSE: FLR) has
fingers in many different types of construction projects.

What’s more, the world of environmental construction is governed by longstanding
relationships. Through its already established presence in the corridors of
Capitol Hill and various overseas outposts, Tetra Tech can leverage its proven
track record to scoop up its share of contract spoils.

The average analyst expectation is for Tetra Tech’s earnings to grow
year-over-year by 9.3% in the current quarter, 14.3% in the next quarter, and
13.8% for full-year 2023. Those are impressive numbers, considering the anemic
earnings projections for the S&P 500 in the second half of 2023.

TTEK’s share price currently hovers above its 50- and 200-day moving averages,
indicating that the stock is in an uptrend.

As a provider of essential services, the company is buffered against economic
cycles and market corrections. You can disaster proof your portfolio, with a
stake in Tetra Tech.

Editor’s Note: I just showed you how to make money from eco-disasters. if you’re
looking for other ways to turn chaos into cash, I suggest you consider the
advice of my colleague, Jim Pearce.

Jim Pearce is chief investment strategist of our premium service Mayhem Trader.
He has spent the past year perfecting a powerful indicator that’s designed to
make money in a hostile market. To learn more, click here.

Subscribe to the Investing Daily video channel by clicking this icon:

 


ABOUT THE AUTHOR

John Persinos
Bio | Archive
John Persinos is the editorial director of Investing Daily, overseeing such
publications as Personal Finance, Utility Forecaster, Profit Catalyst Alert,
Rapier's Income Accelerator, Income Forecaster, and Marijuana Investing Daily,
among others. John also writes the Mind Over Markets daily stock market recap,
and he's the chief investment strategist of Marijuana Profit Alert.

 
John has decades of experience in the technology and political realms. He has
worked as a staff editor at Inc. and Venture magazines, and written for
Kiplinger's, Street Authority, Investing Answers, and TheStreet.com, to name a
few. In a career that has spanned more than 40 years, John has been diligently
and prolifically covering the news and its impact on investors.

 
John also has experience with the inner-workings of Capitol Hill, serving as a
press secretary to U.S. Rep. Byron Dorgan (D-ND). John started his career as a
daily newspaperman with The Orlando Sentinel.

 
John holds undergraduate and graduate degrees from Boston University. He also
completed the Davenport Fellowship in Business and Economics Reporting at the
University of Missouri (Columbia).

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