On June 29th, as part of our Macro Trends/Micro Caps series of articles, we suggested water held great investment potential. And when we said water, we meant every facet of it…purification, infrastructure, and desalination. The expectation still stands - we think an investment in select water-oriented stocks today could pay large dividends in the not-too-distant future.

As for the stocks we mentioned in the article, we’ve seen everything under the sun - some hot, some cold, and some tepid. Let’s review some of the more pertinent changes.

The three water infrastructure stocks we cited were Mueller Water Products Inc. (MWA), Tetra Tech (TTEK), Layne Christensen Co. (LAYN). Mueller and Tetra tech have been disappointing, but Layne Christensen has been phenomenal - it’s up 33.2% from where it was trading in late June.

However, LAYN also appears to be at a short-term top. It peaked $58.91 in early October, and a public offering going on right now at $54.50 per share certainly isn’t going to inspire a move higher anytime soon. Our research staff believes there may be more downside in store before any recovery begins.

In the water purification arena we studied AquaCell Technologies Inc. (AQUA.PK), Basin Water, Inc. (BWTR), Megola Inc. (MGOA.PK), and Global Water Technologies, Inc. (GWTR.PK). AquaCell and Megola have been lethargic. Basin Water, on the other hand, has done quite well over the last four months…it’s up 35.1% since June 29th.  The chart has been in a consolidation mode the last month or so, so it’s not clear if this is the end of the road or not; it might just be a rest period for the rally. It’s worth keeping an eye on.

The name we really want to highlight is Global Water Technologies, but not because it’s done well - it’s been just mediocre over the last several weeks. However, some technical analysis of this chart suggests there may be a big recovery move in the works.

We’re primarily keying in on the 200 day moving average line, which is considered by many technical analysts to be the primary long-term trend line. GWTR hasn’t been above it since mid-2005, and hasn’t even been near it since mid-2006. As of a week ago though, it’s within striking distance. The shares last traded at $0.002, while the 200 day line is resting at $0.0023.

Before becoming too impressed, also bear in mind that stocks trading under a penny bring their own special type of pricing, spread, and commission issues. And, a cross above any moving average line is far from an infallible sign of a recovery. We just believe it’s a chart some speculators may be interested in, as it could get far more interesting very soon.

Finally, our water desalination discussion turned up Ultra Pure Water Technologies Inc. (UPWT.PK), and Water Chef Inc. (WTER). These have been a mixed bag as well, though UPWT’s move from 12 cents in late June to 25 cents in mid-July probably reaped a big reward for a few traders who took profits.

By the way, some of the desalination industry forecasts are incredible (and why we became interested in water in the first place). The need for more desalination capacity is expected to draw an investment of $25 billion by the end of 2010. The total will be $56.4 billion by the end of 2015. Moreover, experts believe that more than half of this capital will come from the private sector.

The global community will find a solution to the water scarcity issue, and desalination will be one of the best answers. The question is, who’s going to offer the best solution cheapest, and first? Maybe Ultra Pure Water or Water Chef. Maybe neither. Either way, it’s a macro trend that’s not going away.

Two things to keep in mind about a ‘macro trend’…it’s not going to happen overnight, and, some stocks won’t finish the race. That’s why we want monitor all these ideas for a while - to see which ones are actually ready to capitalize on the growing demand. It’s likely to take a year or more for any these stocks to realize their full macro trend potential.

Looking for more macro trends that could create huge potential returns for micro cap stocks? Be sure to review our comments on another macro trend we’re following…clean-burning coal. Just click here for the lastest word.

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