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Investing In Water Stocks For Long-Term Growth


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water stocksIf you are looking for the next wining stock sector over the long run, consider investing in water stocks for long-term growth.  Why water stocks and why now?  By conservative estimates, nearly one billion people in the world do not have access to clean drinking water. Even in developed countries, such as the United States, there is a growing water crisis, as arid regions experience a growing shortage of potable water, especially during times of drought. A report by the United Nations concluded that demand for fresh water has tripled during past fifty years.  Humans now consume over seventeen trillion gallons of fresh water each year, but even this amount is not nearly enough to supply the growing demand for fresh water.

If there is one thing that drives business opportunities, it is a shortage of an essential product that in high demand. The growing water shortage in many parts of the world needs to be addressed, and billions of dollars are flowing into the water industry to meet the growing demand for potable water.  This means that companies that are in the business of building water purification and supply systems are poised for growth in their businesses for many years to come.  In the United States, the Environmental Protection Agency (EPA) has concluded that the United States alone needs to spend at least $500 billion over the next two decades to replace and upgrade all of the water infrastructure that is outdated and needs replacement to meet the projected demands for water.  That is a staggering amount of money that will flow into the water industry, and does not include investments in water infrastructure that need to be made outside of the United States.

Ideas For Investing In Water Stocks For Long-Term Growth

American Water From providing potable drinking water to providing water for industrial and agricultural uses, the growth opportunities in the water purification and supply business sector are enormous and will remain so for many years to come.  The sources of water can include ground water, rivers, lakes, seas, oceans, and even waste water that would otherwise be discharged into a body of water.  Using a variety of purification technologies, just about any type of water can be processed for use as either drinking water or water for industrial or agricultural purposes. The following are stocks of companies that are involved in purifying and distributing water, which should benefit from the growth in demand for potable and industrial water over coming decades.

  • American Water Works Company Inc. (NYSE: AWK) provides water and waste water services in the United States and Canada.  The company is the largest publicly traded water and waste water utility in the United States, providing water services to approximately fourteen million people in more than forty states and portions of Canada.  American Water Works’ size and reach within the water industry make it one of the key stocks to own in the water sector.
  • Ecolab Inc. (NYSE: ECL)’s Global Industrial division provides water treatment and water process applications to large industrial customers.
  • Flowserve (NYSE: FLS) designs, manufactures, distributes, and services industrial flow management equipment that is used for both industrial manufacturing purposes and for water processing purposes.
  • Pentair Ltd. (NYSE: PNR) operates a Flow Technologies division that designs, manufactures and markets products and services the transfer and flow of clean water and wastewater.  The company provides water purification and treatment technologies, as well as pumps and filtration equipment used by the water treatment industry.
  • Xylem (NYSE:  XYL) designs, manufactures, and provides engineered technologies for the water and waste water treatment applications.
  • Calgon Carbon Corporation (NYSE:  CCC) manufacturers activated carbon and filtration systems used to purify water and to treat wastewater and contaminated ground water.  The activated carbon and filtration systems are used to remove chlorine and other volatile organic compounds from wastewater.  They are also used to remove sediment.
  • Enter Northwest Pipe (NASDAQ:  NWPX) manufactures large-diameter, high-pressure, and engineered steel pipe products that are used by water company pipeline systems for water transmission.  They are also used in hydroelectric power system and waste water system applications.
  • Aqua America (NYSE:  WTR) operates local water utilities that provide water or waste water services in the United States.  The company has been aggressively expanding by buying small and local municipal water utilities that need investments to improve their water treatment and distribution systems.

Ideas For Investing In Water Funds For Long-Term Growth

Water ETFs There are also several Exchange Traded Funds (ETFs) and mutual funds that invest in stocks of companies that are involved in purifying and distributing water.  These Exchange Traded Funds and mutual funds provide a way to diversify investments in the water sector across dozens of companies involved in water treatment and delivery.  They also provide the advantage of allowing professional money managers to make decisions regarding which water purification and distribution companies to invest in.

  • PowerShares Water Resources (PHO) is the largest exchange-traded fund (ETF) that invests in the water sector.  The fund is designed to replicate the NASDAQ OMX US Water Index.  The fund invests in stocks of companies included in the tracking index, which are involved in the water industry.
  • Guggenheim S&P Global Water ETF (CGW) is an exchange-traded fund (ETF) that tracks the S&P Global Water Index.  The index includes fifty stocks of companies involved in water utilities, infrastructure, equipment, and materials.
  • PowerShares Global Water ETF (PIO) is an exchange-traded fund (ETF) that tracks the NASDAQ OMX Global Water Index.  The index includes stocks of companies that manufacture and sell products that conserve and purify water.
  • For investors that would rather invest in mutual funds, consider the Calvert Global Water A (CFWAX).  The fund has impressive three and five year annualized returns of over 13% and 12% respectively.  The downside is that the managers of the Calvert Global Water A fund charge hefty annual maintenance fees of nearly 2% and a front-end sales fee of nearly 5%; however, they are delivering long-term investment returns in the double digits, and therefore the mutual fund is worthy of consideration.  The Calvert Global Water A fund invests in stocks of companies active in the water resource sector or significantly involved in delivering water-related technologies or services.

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