INDUSTRIALS

The EPA Targets “Forever Chemicals” And Water Utilities Eye Big Profits

They say, “Nothing lasts forever” — but Teflon cookware begs to differ. Decades after becoming a stovetop staple, the chemicals used in their production, including PFAS (Per- and Polyfluoroalkyl Substances), have been linked to cancer and liver damage. Known as “forever chemicals,” PFAS are now found in nearly half of America’s tap water — and the government and utility companies are preparing to spend billions to clean up this mess.

Washing away toxicity: Last year, manufacturers of forever chemicals like DuPont ($DD), Chemours ($CC), and Corteva ($CTVA) paid $1.18B to settle claims of water contamination. But the cleanup will cost 200x more — and America is just getting started. In April, the Environmental Protection Agency (EPA) singled out two forever chemicals as hazardous under the Superfund Law, requiring water utilities to monitor and reduce their levels in drinking water to near-zero. This move aims to help 100M+ affected Americans reduce their exposure to these harmful substances.

• Compliance could cost utilities up to $3B annually, affecting ~6K US public drinking water providers who may currently fail to meet these new standards.

• Bloomberg Intelligence estimates revenue from PFAS cleanup for the environmental industry could rise from under 1% in 2023 to 10% to 15% by 2027.

H2Oh So Rewarding

The global cleanup of forever chemicals is becoming increasingly lucrative, especially for US companies specializing in water treatment technologies. The remediation could add an additional $300B in spending by 2040 — with $200B flowing into companies like Aecom ($ACM) and Clean Harbors ($CLH). More companies are likely to benefit unexpectedly from this effort.

• Aecom expects to earn $10B from its water services over the next decade, while Montrose Environmental ($MEG) projects that PFAS cleanup services will account for ~12% of its revenue this year.

• In the past year, chemical treatment companies like Xylem ($XYL) and Minerals Technologies ($MTX) have seen their shares rise ~20% and ~50%, respectively, partly due to the demand for PFAS cleanup.

Litigation to remediation: Since 1999, over 9.8K lawsuits have been filed across 140 industries, resulting in ~$16.7B in settlements related to PFAS harms. Companies historically associated with these chemicals, such as 3M and DuPont, are actively phasing them out in response to growing regulatory pressures. These evolving standards are expected to drive more water utilities to invest in remediation solutions.

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Survey Says: Investment Strategies Are Still Shifting Towards Private Credit

The stock market is burning red hot these days, which has many investors wondering: If a market correction happens, where can they ride out the storm?

A Bloomberg survey¹ reveals that many institutions now prefer private credit over bonds to hedge against economic downturns. Why? T. Rowe Price data² suggests that allocating 10% to private credit historically reduces volatility and improves risk-adjusted returns.

But this “safe haven” asset class isn’t just for Blackstone, KKR, and Morgan Stanley–now, everyday investors can diversify with private credit using Percent.

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LARGECAP RECAP

🪫 Global Battery Makers Are Feeling the Pain of the EV Slowdown

Automakers are running on empty with higher interest rates and flailing investments in electric vehicles (EVs), and the battery industry that powered their green dreams is also losing charge. After two years of warnings from automakers, the battery companies driving the world’s EV boom are starting to suffer a similar fate.

• The CEO of battery producer SK On declared an “emergency” after the firm reported its 10th consecutive quarter of losses since its 2021 spinoff.

• Competitor LG Energy also saw its operating profit fall 58% year-over-year in its latest report, a consequence of slowing EV sales.

Delivery probs: UBS’s Tim Bush said battery producers offered overly generous terms to automakers and hyped EV newcomers. But with rates high and Americans pulling back on discretionary spending, automakers have struggled to meet order expectations — further complicated by the industry’s failure “producing high-quality affordable EVs” (FT). For instance, General Motors aimed to sell 1M EVs in 2025 — but sold just 21,930 in the second quarter of 2024.

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Markets & Economy

Office vacancies hit record high: June’s office vacancy rate reached 20%, the highest since Moody’s began tracking in 1979. Despite economic resilience, pandemic-induced work changes have driven this unusual trend. [Read]

Citi warns about the AI stock rally: The bank’s strategists advise taking profits on prominent AI names like NVIDIA ($NVDA). While not a bubble yet, AI stock sentiment is the strongest since 2019, with some names flagged as “concerning.” [Read]

S&P 500 forecasts lose credibility: Piper Sandler drops S&P 500 price targets, which are increasingly unreliable given the concentration of tech giants. A Vanguard study found returns deviating significantly from forecasts, deeming them “meaningless and futile.” [Read]

Business & Wealth

Biden’s campaign faces uncertainty: Stifel’s chief Washington policy strategist estimates a 40% chance of President Biden dropping out. The strategist believes that Biden may achieve a favorable outcome if he remains, appealing to voters who won’t vote for Trump. [Read]

Young couples cohabitate to cut costs: High housing costs push young couples to move in together earlier. Some benefit financially and strengthen bonds, while others struggle with merging lifestyles and resolving conflicts. [Read]

Crypto thefts surge in 2024: Hackers stole $1.38B in cryptocurrency in the first half of 2024, more than doubling last year’s thefts. Vulnerabilities include compromised private keys and seed phrases. Experts suggest multi-layered defenses and frequent audits. [Read]

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DIGIT OF THE DAY

America Is Going Through A Bankruptcy Boom, With June Seeing 75 New Monthly Filings

Bankruptcy courts are working overtime this year, with corporate America seeing the highest monthly bankruptcy count since 2020. According to S&P Global Market Intelligence, the US recorded 75 new bankruptcies filed by mid-size and large corporations in June. Given ongoing economic pressures, this trend could continue.

• So far, in 2024, there have been 346 bankruptcy filings, including 17 cases with liabilities exceeding ~$1B — outstripping any comparable figure from the last 13 years.

• The consumer discretionary sector accounted for 55 of these filings — while the healthcare and industrial sectors each had 40.

‘Til debt do us part: S&P Global blames high interest rates, supply chain disruptions, and slowing consumer spending. Many of today’s business failures have their roots in yesterday’s economic environment. Companies like Fisker and RedBox benefited from low interest rates and held billions in debt before their filings. However, there is hope as labor market stabilization and cooling inflation fuel optimism about a possible Federal Reserve interest rate cut in September.