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Two thirds of the world population could suffer water shortages and pollution by 2025, according to the World Bank, which highlights the hugely growing market for treatment technology. Some £30 billion a year is spent globally on water treatment, filtration and de-salination plants but spending might have to more than double by 2020 to ensure sufficient supplies of potable water.

Though the industry is dominated by conglomerates such as Siemens (SI:NYSE), there are a few smaller quoted companies that might tempt investors. Hydro International (HYD:AIM) and Amiad Filtration Systems (AFS:AIM) are two junior market stocks that are thriving. Last week Amiad issued a trading update saying that demand for its products was stronger than expected.

Sales into China took off in the last half of 2007, prompting brokers at Panmure Gordon to say ‘the increased global demand for clean water from both industrial and agricultural sectors is creating a hot market for Amiad’s products.’ Amiad, an Israeli company, should lift sales by 26% in 2007 to around £23 million with profits up to £2.4 million. This year Panmure forecasts sales of around £30 million and profits of £3.3 million cutting the prospective PE to 12.3.

Shares says: Fill your butts with water treatment shares.

BUY Hydro International, Amiad Filtration

by: Timon Day