NOT INVESTMENT ADVICE

Hello, everyone! As the weekend approaches, I’d like to share some thoughts with you based on our prompts (@Raketentoni , @Aktienhauptmeister ) as we head into the weekend.

The main question is: Will this company be a major beneficiary once the conflict in the Middle East ends?

The company has been affected by—and is still suffering from—the conflict with Iran. However, it operates in a high-growth sector and provides essential services.

Expansion into India offers further potential and would reduce the 50% share of revenue coming from the Middle East.

Let’s discuss: What opportunities do you see with

Energy Recovery
$ERII (+0,67%) ?

Attacks on desalination plants in the Iran war: Is the Gulf facing a drinking water crisis?

Is a humanitarian crisis looming in the Iran war? Attacks on desalination plants threaten the water supply in the Gulf

Qatar, Kuwait, and Bahrain rely on seawater desalination: Securing drinking water for millions of people

Gulf States Fear a Chain Reaction: Attacks on Water Infrastructure Could Affect Entire Regions

Iran-Krieg: Angriffe auf Entsalzungsanlagen bedrohen Trinkwasser

Energy Recovery foresees robust long-term growth (high single-digit end-market growth), but is struggling in the short term with geopolitical delaysthat are slowing the implementation of major projects. Despite these uncertainties, the company is sticking to its CAPEX plan of $3–6 million .

🔍 Key Points

• Short-term risks:
• Delays due to geopolitical factors, financing, procurement, and logistics.
• Visibility and timing for major projects are currently limited.
• Saudi Arabia Manufacturing:
• New production facility is expected to significantly reduce costs (transport, shipping, procurement).
• Margin improvements will come gradually, not immediately.
• Long-term pipeline:
• Demand remains consistently strong.
• The backlog is sufficient several years into the future.
• The problem remains the timing of project implementation.

📈 Implications for investors

• Fundamental demand remains stable → positive in the long term.
• In the short term, however, Uncertainty regarding revenue recognition due to external factors.
• Margins could rise noticeably starting in 2027/2028 due to the Saudi plant could rise significantly.

July 20, 2026 • 8:00 a.m. EDT

Energy recovery technology to ensure water security for one million people in the Mecca, Al-Baha, and Asir regions of Saudi Arabia

Pressemitteilung ansehen

Second-Quarter Highlights

• Revenue totaled $12.0 million, down from $16.1 million in the second quarter of 2025.
• The gross margin was 74.7%, compared to a gross margin of 64.0% in the second quarter of 2025, primarily due to indirect manufacturing costs and channel mix, partially offset by lower volume.
• Operating expenses totaled $14.8 million, a decrease of 10.0% compared to the second quarter of 2025, primarily due to lower employee compensation costs, including stock-based compensation costs, as well as lower consulting costs, which were partially offset by restructuring costs in the second quarter of 2026.
• Operating loss of $5.9 million, a decrease of $7.4 million compared to $1.5 million in the second quarter of 2025, primarily due to lower revenue resulting from the war in Iran.
• Net loss of $3.2 million and adjusted EBITDA(1) loss of $2.6 million.
• Cash and investments totaling $98.1 million, including cash, cash equivalents, and short- and long-term investments.

(Published on August 5, 2026)

Monday, June 29, 2026

Energy Recovery Celebrates New Projects

Energy Recovery (NASDAQ: ERII) announced today five new contractually approved wastewater projects in India, involving the installation of multiple PX® Pressure Exchanger® (PX) energy recovery systems in industrial reverse osmosis (RO) plants across the country.

The projects reflect India’s stricter regulations on wastewater discharge and a growing shift toward water reuse in the industrial sector. India is home to about 18% of the world’s population but has only 4% of the world’s freshwater resources, and the country’s water demand is projected to be twice the available supply by 2030.

To address this challenge, more and more operators are turning to reverse osmosis treatment strategies. Energy Recovery’s new orders are all for Zero Liquid Discharge (ZLD) systems, a wastewater treatment process that eliminates all liquid waste from industrial facilities but can be energy-intensive. Energy Recovery’s equipment significantly reduces the electricity consumption required to operate the system.

“India is moving rapidly toward water reuse and ZLD, and this shift is really putting pressure on the energy economics of industrial water treatment,” said David Kim-Hak, vice president of wastewater at Energy Recovery.

"Operators in these industries are now integrating energy recovery equipment into their systems from the outset. Bringing the proven efficiency and reliability of our PX technology to these applications helps them reduce operating costs and emissions while also lowering their exposure to volatile electricity prices."

Baystreet.ca - Energiegewinnung begrüßt neue Projekte

Water scarcity is the driving issue

Energy Recovery is a leading provider of energy recovery systems, having become particularly well-known for its PX Pressure Exchange systems. These are patented desalination systems for seawater, brackish water, and wastewater, based on reverse osmosis. The primary driver for Energy Recovery is thus the growing demand for freshwater. According to the United Nations, a global supply shortfall of 40% in drinking water could emerge worldwide as early as 2030. Energy Recovery can also improve the efficiency of wastewater treatment and CO₂ cooling systems.

Energy Recovery, Inc. develops and manufactures energy-saving technologies for critical infrastructure. The company’s business segments include “Desalination,” “Wastewater,” and “Future Technologies.” The “Desalination” business segment includes hydraulic turbochargers and pumps used in seawater desalination plants. The “Wastewater” segment includes hydraulic turbochargers and pumps used in wastewater treatment plants. The “Future Technologies” segment focuses on the sales and support of activities related to new technologies, such as the PX G1300, which is used in industrial and commercial refrigeration applications. Pressure exchanger products include Low-Pressure PX, High-Pressure PX, Ultra High-Pressure PX, the PX Q Series, and PX PowerTrain. Pump products include the CPXP axial piston pump, the ATMP high-pressure pump, the ATMP pressure-boosting pump, the HPXP high-pressure centrifugal pressure-boosting pump, the HP pump, the UHP pump, and the VPXP pump. The company serves the brackish water reverse osmosis (RO) plant sector, modular RO systems, and the retrofit industry.

Number of employees: 230

Geographic revenue breakdown:

2025 (USD)

Middle East 68.18 million

Others 51.8 million

Africa 15.01 million

Energy Recovery Reports its Second Quarter 2026 Financial Results

Energy Recovery berichtet seine Finanzergebnisse für das zweite Quartal 2026 :: Energy Recovery (ERII)

Date of publication: February 25, 2026

August 7, 2026, 12:14:10 p.m. •

gettex (EUR)

7.524 EUR

$ERII (+0,67%)

Reading time: approx. 4-5 minutes

One of the questions that comes up again and again here on Getquin is: When is the right time to buy? The discussion often revolves around valuations, historical multiples or possible setbacks. This perspective is understandable. At the same time, it often distracts from a decision that is at least as important for the risk of a portfolio: the position size.

Many losses do not occur because an idea was fundamentally wrong. They occur because a position was too large. Conversely, the opposite also happens. A good idea works, but is weighted so small that it has hardly any effect on the portfolio. It is therefore worth thinking not only about whether a company is interesting, but also about how much capital should be allocated to it in the first place.

The background is relatively simple. The future is uncertain. Companies can perform better or worse, markets can grow or stagnate, valuations can rise or fall. Forecasts usually try to predict a single future path. In practice, it often makes more sense to work with scenarios, i.e. several plausible developments.

This is exactly where the logic of position sizes begins.

Position values are essentially derived from two dimensions. Firstly, from the quality of a company. This includes competitive advantages, return on capital, market position and the stability of cash flows. Secondly, from the uncertainty of future developments. This can arise from technological changes, cyclical markets, regulatory risks or simply the size of a company.

The higher the quality and the more stable the business model, the larger a position can be in the portfolio. The more uncertain the possible future paths, the more cautious the weighting should be.

A small thought experiment illustrates this logic.

Assume a company is analyzed and three plausible scenarios for the next five years are defined.

In the bullish scenario, the company grows strongly, the valuation remains stable and the share price doubles. In the neutral scenario, the company grows moderately and the share price rises by around 40 percent. In the bearish scenario, growth is disappointing and the share price falls by around 30 percent.

If these scenarios are assigned probabilities of around 30 percent for the bullish scenario, 50 percent for the neutral scenario and 20 percent for the negative scenario, this results in an expected value.

30 percent times plus 100 percent

50 percent times plus 40 percent

20 percent times minus 30 percent

The weighted expected value is therefore approximately plus 44 percent over five years. That is attractive. Nevertheless, a high expected value does not automatically mean that a position should be large. The spread of possible outcomes is also crucial. An investment with high uncertainty typically has a lower weighting than a company with more stable cash flows and narrower scenarios.

In practice, this often results in three categories in the portfolio.

The first category is core positions. These are companies with structural competitive advantages, high returns on capital and relatively stable business models. An example of this is $GOOGL (-0,92%) (Alphabet). The company has dominant platforms in the search engine and advertising market as well as considerable economies of scale. Another example is $V (-0,95%) (Visa). The global payment network benefits from strong network effects, high margins and a business model that functions relatively independently of short-term economic fluctuations. Such companies can often achieve weightings of around five to ten percent in the portfolio.

The second category is satellite positions. These are usually smaller companies or companies with more volatile results whose business model nevertheless appears attractive. Examples of this could be $ERII (+0,67%) (Energy Recovery) or $EKT (-1,1%) (Energiekontor). Both benefit from structural trends such as water infrastructure or renewable energies, but are also subject to greater operational fluctuations than global platform companies. Typical weightings here are often in the range of two to five percent.

The third category is option positions. These are investments with very high uncertainty but potentially high upside. Commodity companies or very small growth companies often belong in this group. An example would be $DML (+0,52%) (Denison Mines) from the uranium sector. Such positions are often deliberately kept small, between half a percent and two percent of the portfolio. The idea behind this is simple. If the investment fails, the damage is limited. If the scenario works out, the contribution can still be relevant.

A concrete numerical example makes this logic more tangible. Let's assume a portfolio of 100,000 euros. A core position with an eight percent weighting then corresponds to around 8,000 euros. A satellite position with a weighting of three percent corresponds to around EUR 3,000. An option position with a weighting of one percent corresponds to around EUR 1,000. Even if such an option position fails completely, the effect on the overall portfolio remains manageable.

Another point is often underestimated. Position sizes are not static. They change automatically over time. If a share rises sharply, its weighting in the portfolio increases. Many of the biggest portfolio winners arise precisely because successful positions are not reduced too early.

An originally small position can become one of the largest positions in the portfolio over the years. This is not a mistake, but often a sign that a good idea has actually developed.

Conversely, it can make sense to reduce positions if valuations rise sharply or if the weighting has become disproportionately large due to price gains. The aim here is not to time short-term price movements. The aim is to maintain the stability of the portfolio architecture.

The most common mistake in this context is overconcentration. It is rarely the result of a consciously planned strategy. It is often the result of narratives. A convincing story, a phase of rapid price gains or strong attention can lead to individual positions being expanded further and further. This makes the portfolio more susceptible to errors.

The key insight is therefore relatively simple.

A robust portfolio is not created by timing every share perfectly. It is created by allocating capital sensibly according to quality, valuation and uncertainty.

Or to put it another way.

The entry determines the price.

The position size determines the risk.

The next article in the series therefore deals with a question that follows on directly from this. How do you actually deal with winners in the portfolio? When should a position simply be allowed to continue and when does a weighting become too large? An exciting example of this is $GOOGL (-0,92%) (Alphabet). A company that has achieved enormous increases in value over many years and at the same time repeatedly raises the question of how to deal sensibly with such winners in the portfolio. This is exactly what the next part will be about: Managing winners properly.

Reading time: about 5–6 minutes

One of the most difficult questions in investing sounds trivial at first: When should I buy a stock? Many investors implicitly answer this question with a forecast. They try to assess whether the market will rise or fall in the short term, whether a correction is imminent, or whether the price might drop even further. The problem with this way of thinking is well known. Short-term price movements are virtually impossible to predict reliably. Even professional investors regularly get it wrong.

That’s exactly why I prefer to work with a different approach: scenarios instead of forecasts. The difference may seem small at first glance, but it changes the entire decision-making framework for the portfolio. A forecast attempts to predict what will happen. A scenario describes several plausible developments and defines how to act in light of these possibilities. The central question is therefore no longer, “What will the market do?” but rather, “What developments are plausible—and what valuation ranges result from them?”

The key point here is that scenarios do not start with price targets. They start with fundamental data. Only once it is clear which operational development is plausible and how the market typically values that development do meaningful entry and exit zones emerge.

The process always follows the same sequence: determine business quality, define earnings drivers, formulate operational scenarios, derive valuation ranges, and use these to develop specific price zones. This logic may seem analytical at first, but in practice it is surprisingly robust because it ties investment decisions to a company’s structural characteristics rather than to short-term market sentiment.

A helpful first step is a simple classification: Where does a company’s greatest uncertainty actually lie—in its earnings or in its valuation?

In the long term, stock prices are determined by two variables: a company’s earnings and the multiple the market assigns to those earnings. This leads to a simple framework for thinking. If earnings are relatively stable but the valuation fluctuates, it is a valuation case. If, on the other hand, the valuation is relatively stable but earnings can fluctuate significantly, it is more of an earnings or growth case.

This distinction is more important than it initially sounds because it determines how scenarios must be constructed. For quality companies, scenarios arise primarily from valuation ranges. For smaller growth companies, on the other hand, scenarios arise from different earnings trajectories.

A good example of the first case is $HON (+1,67%) (Honeywell International). Honeywell is a classic quality industrial stock with stable returns on capital and moderate growth. Typical key metrics from recent years show a relatively clear profile: revenue growth in the range of about four to six percent, operating margins roughly around 20 to 21 percent, and a free cash flow margin of about 15 percent. Returns on capital have been in the high teens over the long term. The company thus clearly belongs in the category of high-quality industrial stocks, even if individual metrics fluctuate over the business cycle.

Such companies have a relatively stable operating range. What fluctuates more is the valuation the market is willing to pay. Historically, Honeywell has often traded within a valuation range of approximately 23 to 27 on a price-to-earnings ratio, with sometimes significantly lower or higher swings during specific market phases. For scenario analysis, therefore, a pragmatic range of about 21 to 25 is sufficient as a typical valuation zone.

When the share price in my case was just above about 160 euros, this corresponded to a P/E ratio of around 18 and a free cash flow yield in the mid-single-digit range. The market thus treated Honeywell more like a typical industrial stock, even though its returns on capital are structurally higher. This is precisely where the logic of the scenario comes into play. If the quality of the company remains stable but the valuation is significantly below the historical range, an asymmetric situation arises: the downside risk is limited, while a return to normal valuation opens up significant upside potential.

The following scenarios are therefore not precise valuation models, but rather heuristic derivations based on two variables: a plausible earnings trend over the next three to five years and the historical valuation range.

In the bearish scenario, the industrial environment remains weak and the market continues to value the company conservatively. Earnings grow only moderately, perhaps in the range of three to four percent per year, and the multiple remains at around 20. This results in a fair valuation roughly in the range of about $200.

In the neutral scenario, the valuation normalizes back toward the historical midpoint. Operations grow steadily, with earnings growth in the range of six to seven percent per year, and the multiple returns to around 23. In this case, the valuation comes to around $230.

In the bullish scenario, additional structural drivers come into play. Honeywell benefits more significantly from long-term trends such as automation, the digitization of industrial processes, or robust demand in the aerospace segment. Earnings growth could then be more in the range of eight to nine percent per year, while the market once again pays a clear quality premium and accepts a multiple of around 25. This results in a valuation in the range of approximately $250 to $260. These fair-value ranges should be understood as heuristic derivations from the earnings trajectory and historical multiple range, not as precise DCF results.

These scenarios form the basis for specific action zones. The entry price of around 160 euros was clearly below the neutral scenario. In this situation, the position was deliberately built up in full because the share price was already moving within the range of the bearish scenario and thus offered an attractive asymmetric valuation. The downside appeared limited, while a return to the normal valuation range opened up significant potential.

Equally important, however, is the other side of the decision: the exit. Many investors define entry strategies but give little thought to exit zones. Yet the two are closely linked. If scenarios are clearly defined, potential exit zones follow automatically. In my case, these are around 220, 240, and 260 euros, with a one-third reduction in the position at each level. These levels correspond quite precisely to the movement across the scenario range: first the neutral scenario, then a more ambitious quality assessment, and finally a range in which a bullish scenario is already largely priced in. The fair value calculations are based on U.S. dollars, while the exit zones are expressed in euros, as they are based on the actual trading prices at that time.

The price does not have to reach these levels exactly, and I am currently still holding the entire position. These zones do not serve as rigid sell rules, but rather as reference points for valuation. As the valuation rises, the risk-reward ratio deteriorates, even if the company continues to perform well operationally.

A completely different picture emerges with $ERII (+0,67%) (Energy Recovery). The company has an interesting business model centered on energy recovery technology, particularly in the areas of water desalination and water treatment. At the same time, it is significantly smaller and more dependent on individual applications and projects. A large portion of revenue continues to come from the water segment, while new applications in areas such as LNG or industrial pumping systems are still in an early stage of development.

The key uncertainty here therefore lies less in the valuation than in the development of earnings. While the gross margin is very high, the operating and net margins are significantly lower and can fluctuate more widely. However, the key factor is revenue momentum, which has historically fluctuated between years of weaker and significantly stronger growth.

The scenario analysis is therefore primarily based on different growth trajectories over the next three to five years.

In the bearish scenario, growth remains weak. The core business performs steadily, but new applications do not scale. Revenue growth could then be in the range of two to three percent per year, and the fair value would likely be in the range of about 8 to 10 euros.

In the neutral scenario, the core business continues to grow solidly. Revenue and profit rise in the range of about five to seven percent per year, and the fair value is roughly in the range of 14 to 16 euros.

In the bullish scenario, however, new applications begin to scale. Growth in the range of ten to twelve percent per year becomes possible, and the valuation rises accordingly. In this case, the fair value could be in the range of about 22 to 25 euros. The ranges here are deliberately wider than in the Honeywell example because both the earnings trajectory and the valuation can fluctuate more significantly for small-cap stocks.

The initial entry at around 15 euros was thus almost exactly in line with the neutral scenario. That is precisely why the initial position was deliberately small. When the market later corrected sharply downward, the price approached the bearish scenario. During this phase, the position was increased. The result is a position that is currently showing a moderate loss, but whose risk-reward ratio has improved significantly. As long as the bearish scenario path does not materialize fundamentally, adding to the position near the lower valuation zone remains rational because it shifts the position closer to the middle of the scenario range.

This highlights an important distinction. With Honeywell, it is primarily the valuation that fluctuates. With Energy Recovery, it is primarily the earnings trajectory that fluctuates. This distinction determines the entire decision-making framework. Quality companies often move through different valuation phases. Smaller growth companies, on the other hand, move through different earnings trajectories.

As a heuristic, this can therefore be summarized as follows: For quality companies, valuation typically fluctuates. For small-cap companies, earnings typically fluctuate. Anyone who wants to derive scenarios accurately must first understand which of these two variables plays the dominant role.

Scenarios are thus not a rhetorical safety net designed to explain every development in hindsight. They are the structural framework of the decision. They link fundamental data with valuation and translate this combination into concrete zones of action.

A portfolio then no longer consists of individual, spontaneous buying decisions, but rather of a decision-making architecture: Scenarios define valuation ranges; valuation ranges define entry and exit zones; and these zones determine how capital is allocated within the portfolio over time.

This is precisely where the connection to the next part of the series comes in. For even if scenarios are carefully derived, one central question remains: How large should a position actually be? Different uncertainties require different weightings. A quality stock with stable cash flows is typically weighted differently than a small-cap growth stock with a wide range of possible scenarios. The next article will therefore focus on the second level of the decision-making architecture: position sizes under uncertainty—and how scenarios determine not only entry zones but also the allocation of capital within the portfolio.

Reading time: approx. 5–6 minutes

Many of my recent posts have focused on metrics that help clearly classify business models, risks, and valuations. Beta is one such metric—and it plays a particularly important role. It’s widely available and easy to look up, but it only becomes truly meaningful when viewed in the context of an entire portfolio. This is because beta does not describe the company itself, but rather how a stock behaves in relation to the market.

Mathematically, beta measures the relationship between stock returns and market returns. It is based on the covariance of these returns—which is always derived from historical data. However, the interpretation is inevitably forward-looking, because we use past patterns to infer how a stock will typically behave relative to the market in the future.

Formally, the metric is defined as:

Beta = Covariance(stock return, market return) / Variance(market return)

In practical terms, this means: When the market moves, how strongly does the stock typically move along with it? Values around 1 indicate movements similar to the market; higher values indicate greater volatility, while lower values indicate more stable behavior.

The reason beta is often misinterpreted is that it is not stable. It depends heavily on the time period, the market phase, and the chosen index. A company can continue to perform solidly, but suddenly exhibit a different beta due to changes in interest rates or the risk environment. Beta therefore measures behavior—not quality.

To better illustrate how beta affects a portfolio, it’s worth taking a look at my portfolio. It combines robust, high-quality stocks such as Visa, Alphabet, and Honeywell; growth-oriented technology stocks such as ASML, Nu Holdings, and Innodata; defensive infrastructure and water stocks such as Consolidated Water, Energiekontor, and Energy Recovery; the global ETF tracking the MSCI ACWI; and a uranium block as a cyclical play featuring Cameco, NexGen, Denison Mines, Paladin Energy, and Yellow Cake. Bitcoin rounds out the mix as a standalone, significantly more volatile component.

This mix clearly illustrates why beta is useful to me in my day-to-day investing. Different stocks can be fundamentally strong yet contribute very differently to the portfolio’s volatility profile. Some positions smooth out volatility, while others amplify it—regardless of whether the companies are well-managed or highly profitable. It’s about market behavior, not balance-sheet quality.

For my beta analysis, I use conservative, industry-standard 3–5-year figures from major providers. Most betas are calculated based on daily or monthly returns over precisely these time periods—long enough to be statistically stable and short enough to realistically reflect current market phases. Where official data is unavailable, appropriate sector values are used.

The betas used are as follows:

Large Caps

• $ASML (+0,71%) : 1.25

• $GOOGL (-0,92%) : 1.05

• $V (-0,95%) : 0.95

• $HON (+1,67%) : 1.00

Mid-Caps / Infrastructure

• $CWCO (-0,92%) : 0.80

• $EKT (-1,1%) : 0.75

• $ERII (+0,67%) : 1.20

• $SOP (+1,48%) : 1.10

Small-Cap / High Beta

• $INOD (-0,19%) : 1.80

Uranium Segment (Cyclical)

• $CCO (+0,17%) : 1.40

• $NXE (+0,57%) : 1.60

• $DML (+0,52%) : 1.70

• $PDN (-1,26%) : 1.50

• $YCA (+0,9%) 1.30

ETF

• $ISAC (-0,11%) : 1.00

Crypto

• $BTC (-0,72%) : 2.50

The only factor that matters for the portfolio beta is the size of each position relative to the portfolio.

Here’s how the portfolio beta is calculated:

You look at the size of each position in the portfolio, multiply that share by the beta of the respective stock, and add up all the contributions. Each position therefore contributes to the overall beta exactly in proportion to its weighting.

Applying the weightings of my portfolio in this context yields the following result: The portfolio has a beta of approximately 1.33. This value aligns with the portfolio’s structure: a stable foundation, several growth-oriented components, a deliberately included uranium block, and Bitcoin as a stronger lever.

A beta at this level indicates a fundamentally more aggressive portfolio.

• During uptrends, it outperforms the market.
• During corrections, it reacts more quickly and more sharply.
• The strongest drivers are Bitcoin, Innodata, NexGen, Denison Mines, and Paladin Energy.
• Visa, Consolidated Water, Energiekontor, and the MSCI ACWI ETF provide counterbalances.

This shows that beta is no substitute for fundamental analysis, but it does reveal how a portfolio moves and why. It helps calibrate expectations, contextualize fluctuations, and manage the portfolio’s structure more consciously. A beta of 1.33 is not a judgment on quality—it’s a description of movement. The only thing that matters is whether this dynamic aligns with your own investment strategy.

Finally, two questions for you:

Do you know your portfolio’s beta?

And does it play a role in your portfolio strategy—or not really?

Reading time: 10 minutes

Today I would like to give you a brief insight into what I consider to be an enormously exciting industry of the future.

Water is becoming the strategic resource of our time. While capital flows continue to flow into energy, AI and defense, an industry is growing in the background that is likely to determine security of supply, quality of life and geopolitical stability in the future: the efficient extraction, treatment and distribution of clean water. The combination of seawater desalination and decentralized water treatment in particular is developing into a future sector with considerable structural potential.

According to the World Bank, more than two billion people already live in regions with chronic water shortages. Climate change is further exacerbating this situation: periods of drought, declining groundwater reserves and increasing water consumption due to urbanization and industrial production are pushing existing systems to their limits. Traditional water management is increasingly coming up against physical and ecological limitations. As a result, desalination and treatment are being transformed from an emergency solution into a pillar of modern infrastructure - a market which, according to industry analysts, could reach a volume of up to 250 billion US dollars by 2035. These estimates mark the upper end of the forecast range; realistically speaking, growth is likely to be in the region of 6 to 8 percent annually, driven by public investment programs and private infrastructure partnerships.

Technological progress is giving this development a boost. Reverse osmosis, the core process of seawater desalination, is becoming more efficient, more durable and more modular. A key role is played here by$ERII (+0,67%) I (Energy Recovery Inc.): With its PX Pressure Exchanger, the Californian company has established a technology that reduces the energy consumption of desalination plants by up to 60 percent. This brings the economic viability of such projects within reach - even in regions that were previously considered too cost-intensive. ERII acts not as an operator, but as an enabler: a technology supplier that brings efficiency and scalability to a traditionally sluggish industry.

$CWCO (-0,92%) (Consolidated Water Co.) stands for the operational implementation of this change. The company plans, builds and operates desalination plants in the Caribbean, Mexico and increasingly also in the USA. The latest project in Hawaiʻi, with a contract value of over 200 million US dollars, shows that desalination is no longer just a niche technology, but is becoming part of modern public services - even in industrialized countries. While $ERII (+0,67%) stands for energy efficiency and technological differentiation, desalination embodies $CWCO (-0,92%) embodies the infrastructural core: physical access to water.

A broad industrial ecosystem is emerging along the value chain. $XYL (-0,36%) (Xylem Inc.) develops digital control and sensor systems for water and wastewater networks, $VIE (+0,3%) (Veolia Environnement) is a global market leader in the treatment and reuse of water, and $PNR (-0,12%) (Pentair plc) serves the filtration and pump technology sector. $AWK (+0,02%) (American Water Works), the largest listed utility in the USA, stands for stability and predictable cash flows. In addition, there are specialized providers such as Forward Water Technologies or Desalitech (DuPont Water Solutions), which develop decentralized, modular treatment plants - an area that is increasingly seen as a driver of innovation for the entire industry.

This decentralization in particular is changing the logic of the market. While mega-projects such as those in Saudi Arabia or Israel dominate the media attention, the demand for compact, scalable systems for hotels, farms, industrial parks or coastal communities is growing. Such modular systems can be operated locally, require fewer permits and can be flexibly adapted - characteristics that are becoming increasingly important in times of geopolitical uncertainty and disrupted supply chains. This is reminiscent of the transformation in the energy industry: once centrally organized, now increasingly distributed.

The comparison with the solar industry is therefore understandable - albeit with limitations. Water infrastructure remains a local, permit-intensive and capital-intensive business. Scaling is not exponential, but gradual. Nevertheless, the direction is right: just as photovoltaics has decentralized access to energy, water technology will increasingly organize access to drinking and process water locally. Increased efficiency, automation and digitalization do not replace speed here, but ensure sustainability and profitability over long periods of time.

This will create a new form of infrastructure that combines economic stability with ecological necessity. Water is not a substitutable good; it is the basis of every industrial activity. Demand is inelastic, supply is increasingly driven by technology. For investors, this results in a rare combination: social relevance, political backing and economic predictability. Water treatment addresses key sustainability goals of the United Nations and is one of the few areas in which ESG capital flows are congruent with real economic benefits.

Of course, the industry remains challenging. Desalination is energy-intensive, the recycling of concentrated brine is ecologically sensitive and approval procedures often take years. Many projects depend on state planning and financing, which harbors political risks. Nevertheless, the structural logic prevails: without investment in water infrastructure, neither agriculture nor industry will be sustainable in the long term.

The sector offers several opportunities for investors: Technology providers such as $ERII (+0,67%) and $PNR (-0,12%) benefit from margin levers through innovation, operators such as$CWCO (-0,92%) or $VIE (+0,3%) offer stable, inflation-protected cash flows, and digital and infrastructure service providers such as $XYL (-0,36%) connect both worlds via data and control technology. This interplay forms an industry that is not defined by cycles, but by necessity.

Water treatment will therefore become one of the key topics of the coming decade - not as a quickly scalable growth story, but as a long-term answer to the most pressing resource issues of our time. Water is the foundation of every economy, and desalination is its silent but indispensable engine. In my opinion, anyone investing in this sector today is not positioning themselves in the trend, but in the substance.

Reading time: approx. 8 minutes

Market capitalization: approx. € 788 million

Current share price: € 15.64 (as at October 24, 2025)

$ERII (+0,67%) (Energy Recovery Inc.) is one of those engineering stocks that has long operated away from stock market attention and is suddenly at the center of a megatrend. The Californian specialist develops systems that minimize energy losses in fluid-based processes - a technical niche topic that is becoming massively more important in the wake of decarbonization, energy efficiency and water scarcity.

The principle is simple but highly efficient: energy is lost as pressure in industrial processes. Energy Recovery uses this pressure to recover it via closed systems - whether in desalination plants, CO₂-based cooling circuits or heat pumps. The company thus represents the quiet, engineering-driven side of the energy transition.

The share is valued according to the 10B model, which combines technological quality, market potential, management performance, financial strength and risk asymmetry to identify small but potentially multipliable growth stocks.

1. business model - 17 / 20

The foundation of the business model is the proprietary Pressure Exchanger, a technology that transfers kinetic energy between high and low pressure streams. The system has long been the industry standard in seawater desalination - energy requirements can be reduced by up to 60 %.

Energy Recovery generates the majority of its revenue from hardware sales and service contracts, but is gradually expanding the technology to new industries. These include CO₂ refrigeration systems, industrial heat recovery and process gases. This modularity makes the business model more scalable and less cyclical.

With gross margins of over 70% and stable cash flows, ERII is one of the most profitable providers in the energy efficiency sector.

2. market & growth potential - 16 / 20

Energy recovery addresses several global growth trends in parallel. Water scarcity and urbanization are driving the expansion of desalination plants - a market with an annual volume of over USD 10 billion. At the same time, the decarbonization of industry is accelerating the transition to efficient, CO₂-based heat pump and cooling systems.

The total addressable volume of the segments in which ERII is active is between 15 and 20 billion US dollars annually, while current sales are around 125 million US dollars. This shows how much scaling potential there is in the business model.

Growth will remain project-driven in the short term, but structurally robust in the long term - driven by political and economic efficiency targets worldwide.

3rd Technological Position & Moat - 18 / 20

Energy Recovery has a clearly defined technological moat. Over 500 patents protect key components and the PX technology is regarded as the global benchmark in desalination.

The real capital lies in the engineering expertise: the understanding of complex pressure and fluid mechanics is deeply rooted and almost impossible to copy. This specialization gives ERII an edge that goes beyond pure hardware - a platform that physically addresses energy losses, not just measures them on the software side.

Relevant listed benchmarks are:

• $XYL (-0,36%) (Xylem Inc.) - US specialist in water technologies, similarly high-margin but much broader-based.
• $VIE (+0,3%) (Veolia Environnement) - French infrastructure group with a focus on desalination and recycling, but with less technological specialization.
• $DHR (-0,05%) (Danaher Corp.) - global technology group with a focus on environmental and process analytics, more systemic than focused.

This peer group shows that Energy Recovery occupies a technological niche where physical efficiency is the true competitive advantage.

4. management & capital allocation - 14 / 20

David Moon has led the company since January 2025. He took over from Robert Mao, who had prepared the strategic expansion into new applications in 2023/24. Moon, previously Chief Operating Officer, brings operational experience and a clear focus on scaling.

The balance sheet is debt-free and the cash position is over 100 million US dollars. Research and development are financed entirely from cash flow - an indicator of solid capital discipline. Moon pursues a pragmatic approach: less theory, more implementation. The next strategic step is to accelerate the market penetration of the new CO₂ technologies.

This combination of technical depth and financial prudence creates an attractive foundation for sustainable growth.

5. opportunity-risk profile - 15 / 20

With an expected P/E ratio of around 34 (2025e), the share appears ambitiously valued at first glance, but the combination of a high margin, stable balance sheet and structural tailwind speaks for itself.

The risk lies in the speed of scaling. If the transition from desalination to new segments is slower than planned, there is a risk of phases of operational stagnation. In the medium term, however, the opportunity for Energy Recovery to address several vertical markets with the same technology and thus multiply its sales leverage outweighs this risk.

Overall score and classification

After evaluation in the 10B model, Energy Recovery achieved 17 points for business model, 16 for market and growth, 18 for technological position, 14 for management and 15 for opportunity-risk - an overall score of 80 points. It combines technological precision, high margins and conservative balance sheet management in a market with structural tailwinds.

I plan to build up an initial position in the near future. A small technology stock with real leverage on efficiency, water and decarbonization - exemplary for the 10B universe.