 | | Thursday, September 15th, 2005 Baltimore, MD
Jackson, WY
Missoula, MT | Making Water Out of Thin Air |  - Making water out of air: Buy Hendrx (HDRX - OTCBB) under $5.50 a share
| 
"Water will be more important than oil this century"
- Boutrous Boutrous Gali, Former UN General Secretary |
Dear Wealth Daily reader:
You already know Phantom Trader is our water guy.
But if you're not a regular reader you may not know that his water portfolio has been gushing profits. As you can see by the chart of the Dow Jones Water Utilities Index, water stocks have gone gangbusters.
The Phantom Trader holds 4 water positions in his PT portfolio. All are up big.
But here's the kicker: If you own any of these water stocks, you're on the receiving end of a double whammy.
You see, not only are you benefiting from incredible capital appreciation in the price of these shares, but all four stocks also pay a hefty dividend.
And you can expect that trend to continue.
The Phantom Trader has a new recommendation in the water sector. And it's a company that has launched a new, revolutionary water-making technology.
If this pick turns out like his last 4 in the water sector, you should expect some substantial gains in the future.
Here's his most recent dispatch. Enjoy.
-Brian Hicks
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Making Water Out of Thin Air Last week I mentioned a new water company I've been researching. After extensive review, I believe this company is on the verge of a massive growth phase.
 I think you'll agree that this company's product is not only revolutionary, but will receive widespread acceptance in the global water industry.
(I must admit that prediction is a bit of a gimmee...the product has already been proven to be a market favorite.)
Plain and simple, this company is set to dominate the water industry not only in the US, but potentially worldwide.
A few weeks ago the Wealth Daily team and I met with management to get the inside story.
Hendrx Corp. (HDRX: OTCBB, $5), in short, produces a product line that will ultimately swamp the water industry. In particular, the end-user, purified drinking and bottled water industry.
Hendrx develops, manufactures and distributes atmospheric water generators (AWGs). Atmospheric water generators extract drinking water from the air, 24 hours a day, 7 days a week.
These machines provide a constant supply of clean water for pennies per gallon, versus standard delivery models, which run well over a dollar per gallon.
The company was originally founded in China in 1993, and has quietly gained a reputation for quality, innovation and industry leading products.
Now, and this is the remarkable point, the company has yet to tap into the massive North American market, which represents almost $4 billion in the US alone.
That's about to change. And, better still, it's why Hendrx is about to embark on a growth phase that will be at once robust, and long-lasting.
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Got Air? The units are designed for residential use, and are small enough to fit in any home. In fact, they're about the size of a standard five gallon water dispenser used in offices and homes.
Now, the company has patents and plans to manufacture a variety of products. But for this introduction I'm going to focus on the residential model.
Since these units generate water from the atmosphere, all that's needed is a power source to produce fresh water on a constant basis.
 For current bottled water customers, this totally alleviates the need for delivery, cooler rental, bottle disposal and everything that goes along with a bottled water service.
The efficiencies are incredible, and the numbers are huge.
You already know that water is a huge growth industry, world-wide. In the US, however, the water market statistics are simply staggering.
Water is the most-purchased non alcoholic beverage in the US, and that market generates annual sales in excess of $7.7 billion. With a growth rate of 5%, the market is currently dominated by a small number of large companies.
Yet there are no companies who have a product at all like the Hendrx atmospheric water generators.
Given the company's success in test markets, it's a lock-cinch that we'll see Hendrx capture a large and increasing portion of the US water market.
And, the fact that Hendrx is the only AWG manufacturer that's been producing product over the past few years means their competitive advantage is broad.
Superior Technology Some folks simply can't believe there's a system which can make purified drinking water from the air. They look around for a plumbing hookup or some sort of explanation as to where the water is coming from.
Well, it's really pretty simple.
The system operates much like a dehumidifier, which draws water from the atmosphere. But, unlike a dehumidifier, this technology produces clean drinking water, and more.
The Hendrx technology, which is patented, follows an eight phase process which collects water from the atmosphere via condensation, and creates crystal-clear drinking water through a multi-stage filtration process.
Here's how it works: - Phase One is simply air collection.
- The second phase processes the air and pushes it through an anti-bacterial air filter.
- The third phase chills the air, creating condensation, or water.
- Phase four pumps the water into a collection tank.
- The fifth phase processes the water through the first round of UV disinfection.
- Phase six runs the water through a second, ultra filtration process.
- Phase seven filters the water again, through a granulated activated carbon filter.
- Finally, in phase eight, the water is filtered a second time through UV disinfection and then pumped into a storage tank.
The finished product is ultra-pure drinking water produced constantly, right from the air, for only pennies per gallon.
Essentially, these Hendrx filtration systems mimic the natural hydrologic cycle to provide ultra-pure drinking water.
The profit angle here is a clear as the water produced by a Hendrx AWG system. But it gets even better.
Ten Million Without Breaking A Sweat Last year Hendrx had sales of $9.3 million, and sales of $8.7 million in 2003. This year sales are expected to be up slightly, at just about $10 million.
Now, the remarkable thing about these figures is the company has, for the past few years, largely been testing its product, distribution and marketing methods.
These tests were conducted in Lebanon and a few other markets in Asia, including Singapore. Lebanon alone was responsible for 45% of sales.
Now, as an example of how well the company's product was received, you have to realize that Lebanon has a GDP of only $18 billion, and per capita income of less than $5,000.
Yet these units are incredibly popular there.
But to me what's even more amazing is that this company is selling $10 million worth of its product in a few tiny test markets on a limited basis.
And all of this is leading up to one thing.
Now comes the company's planned entry into the North American market. As a result of the company's experience in Lebanon and other smaller markets, I expect we'll see sharp growth next year.
Additionally, the company is ramping up its production facilities from the current 300+ units per day to 1,000 per day by year-end. This alone will allow the company to fulfill orders which were never booked due to production constraints.
Demand for the product is huge.
As an example, when I met with the sales team recently, I was told they've had to turn down orders of over 20,000 units per week simply because they were unable to fulfill them.
When prospective large-scale and municipal clients see the product, inevitably they want a huge order delivered immediately. Now, I have to admit it's a problem to be unable to fulfill orders of any size.
But, on the other hand, there are worse problems to have.
And, after meeting with the plant and production manager over dinner, I'm confident we'll see the company scale up by year end, and absolutely mushroom production over the course of the next 12 months.
There's no question that the demand is there. Now the company simply needs to increase production and capitalize on its unique product, and the fact that there is essentially no competition.
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Next Up The bottom line is that Hendrx is a major growth stock in one of the most solid growth industries-water. And we're on the leading edge, because the market doesn't know this, but we do.
But, unlike every other story we follow, this one also has a retail component.
 As soon as I saw the system Hendrx produces I knew you would be interested not only in the profit opportunity, but the product as well.
So I cut a deal directly with the top brass to offer you, my readers, with the first crack at the Hendrx Atmospheric Water Generators.
I've arranged for interested WD readers to reserve these units for immediate delivery after the first of the year. These will be the first sold in the US, and they'll be available at a huge discount.
More on this in a minute...
Problems, What Problems? I don't want you to think of this as a short-term play. To the contrary, if things go as I expect, Hendrx will be an incredible growth stock for us.
In my mind, there are really only a few minor problems for the company to solve in order to radically increase sales and begin to penetrate the North American market.
First is manufacturing. Right now, the company is producing around 300 units per day at its manufacturing facility in China. The plant is totally modern, state-of-the-art, and hosts over 300 skilled employees.
The company has achieved several technical breakthroughs, and already holds many patents on its design and products.
So, the problem is the company's sales staff has had to turn down massive orders simply because production capacity cannot currently meet demand.
And I should stress that the interest, and the orders that have thus far been declined, have all been outside of the North American market.
However, on the upside, the plant is tooled to produce over 900 units per day utilizing three 8 hour shifts per day. The plant was designed with this in mind, and the company has plans to increase production in this manner.
So it basically boils down to a personnel and management issue. On the personnel side I don't think the company will have any trouble filling the positions.
As for the management, I met with the man in charge of making all of this happen. He's a China manufacturing expert, and a turnaround specialist.
In fact, he's spent the past 7 plus years in China doing exactly what he's tasked with for Hendrx: bringing manufacturing facilities from their current state and realizing their maximum potential.
He's got a team he's worked with during that entire time frame, and they'll handle everything from hiring personnel to dealing with technical issues to inventory management...the whole ball of wax.
On top of the initial phase, there are also plans to increase manufacturing capacity beyond the current facility's potential in order to handle the expected growth.
So it ultimately boils down to a management issue, and the team in charge is well suited to the task. I have no doubt they'll make it happen, and quickly.
The second potential problem is exactly how to penetrate the North American market.
While this issue is still under debate, it seems the best solution is to use currently existing networks, like the independent water dealers already operating throughout the US, and reach agreements with them to sell the product.
Again, based on demand from around the world in test markets, the sales part of the equation should be the easiest.
Once the residential market is being serviced, I expect the company to begin to tap the commercial and municipal markets, which themselves are huge.
The Hendrx products for these markets are just as incredible as the residential units. For instance, the Big Blue, which is the largest unit the company makes, produces 5,000 liters of pure water per day.
Imagine that, especially in light of the devastation from Hurricane Katrina.
A few of these units at the Superdome would have alleviated an incredible amount of suffering, and most likely saved lives. And this is the case in all areas hit by the hurricane.
This technology has the potential to save lives and reduce pain and suffering, not just here in the US, but on a routine basis in third world nations around the globe, where drinking water is often scarce or nonexistent.
This hasn't gone unnoticed by the company.
In fact, it's important to note the impact that the Hendrx technology could have in terms of alleviating the water problems in these regions.
There are so many applications for the technology, Hendrx truly is a phenomenal growth company.
Take a look at the company's website at: www.hendrxcorp.com and contact the IR department for more information: 877-436-3791 or email: info@hendrxcorp.com
Remember, Hendrx is an early-stage opportunity, even thought the company was originally founded in the early '90s. The North American market is huge-almost $4 billion in the US alone.
As the company gears up its manufacturing and launches into the North American market, we'll see sales go straight up.
Also, the company is pursuing an AMEX listing, which will hopefully be in place before year-end. I'm told that the company advising HDRX on this matter already has one of the Hendrx atmospheric water generators and absolutely loves it.
Remember, we'll also have an opportunity to purchase units. As I mentioned last week, I've arranged for subscribers to purchase units at a steep discount to the regular price.
The catch is, of course, we won't be able to take delivery until after the first of the year, when the plant is operating at capacity.
I'll let you know when I've got all the details ironed out, over the course of the next several weeks.
I rate HDRX as an excellent buy for sustained growth in the North American water industry.
Regards,
Phantom Trader
P.S. I'll go in to detail on management in my next report. But I will say this. I spent quite a bit of time with the CEO, whose pedigree in the water business runs deep.
I was impressed not only with his depth of knowledge in the water industry, but his pragmatic and conservative approach to the business.
He knows he's got a winner on his hands. And the business plan bears this out.
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