peony
Equity Investor & Researcher
Energy Recovery is the best way to play desalination if the regime throws a hail mary at desalination plants, which have already been discussed as possible targets. The theme has about a thousandth as many stocks as energy, where low-float proxy BATL rose 27x. Energy Recovery is one of only a handful of pure plays, an optional small cap, with a fortress valuation and project backlog. x.comÂ
Energy Recovery is a high-margin IP business priced like an industrial, and water is the overlooked bottleneck for AI and people alike. Its PX Pressure Exchanger, over 90% of revenue at 60%+ gross margins, cuts desalination energy use up to 60% with no competitor. The stock halved on guidance cuts tied to its 50% Middle East exposure during the Iran war and CEO and CFO exits, but Q1 revenue grew 20% and a resolving war is a catalyst. It has $77M net cash, a ~9% buyback yield and insider buying. … Show more
Energy Recovery is mispriced given the risk that the Iran ceasefire won't last, since any escalation would affect Middle Eastern desalination plants. Its pressure exchangers are critical to reverse-osmosis efficiency, making it probably the purest-play desalination equipment stock, and as a small cap it would move most on a demand spike. Plants needn't be hit for it to reprice, as humanitarian efforts would need clean water if energy infrastructure fails. It trades at its lows. x.comÂ
Water infrastructure is a completely underfollowed and underrated theme as the world enters an era of global water bankruptcy. The best plays are Ecolab, Tetra Tech, Xylem and Northwest Pipe. x.comÂ
