How to Invest in Water
Water is perhaps the most overlooked commodity in our world. Natural resources like gold, oil, and steel are useful, whereas water is an absolute necessity. This commodity is consumed by virtually every living human being on the planet and as such, water is largely considered to be the ultimate commodity by many. Demand for water is steadily increasing given the ever-expanding world population, which is quite concerning since fresh water supply levels are very limited. Although roughly 3/4 of the Earth’s surface is covered with water, less than 1% of that is fresh, available, and suitable for human consumption, leading many to believe that a global water crisis could develop.
An investment in water can also be considered an indirect play on the emerging markets growth story; historical research shows that developing economies will consume more and more water as the standard of living in the country improves.
Ways to Invest in Water
There are 2 ways to invest in Water: ETFs and Stocks. Click on the tabs below to learn more about each alternative.
What are Water ETFs?
There are a number of exchange-traded products that offer exposure to companies in the water industry. The most popular ETF in the space is the PowerShares Water Resource Portfolio (PHO) which is roughly comprised of 30 companies that focus on the provision of potable water, the treatment of water, and the technology and services that are directly related to water consumption. The second largest offering is the PowerShares Global Water Portfolio (PIO), which offers similar exposure as PHO, except with a more diversified portfolio of international holdings; top allocations by country include the U.S., France, United Kingdom, Japan, Brazil, and Singapore.
Guggenheim offers the S&P Global Water Index ETF (CGW), which is comprised of 50 companies, split equally between water utilities and water equipment and materials companies. The least popular offering in the space is the First Trust ISE Water Index Fund (FIW); this ETF holds a basket of approximately 40 companies that derive a substantial portion of their revenues from the potable and wastewater industry.
How to Buy Water Stocks
There are a wide variety of companies who rely on water for a substantial portion of their revenues. The biggest company by market capitalization in this sector is Brazil-based Companhia de Saneamento Basico (SBS) which provides basic and environmental sanitation services in addition to transportation, treatment, and disposal of sewage. The biggest domestic water company is American Water Works (AWK); this New Jersey-based firm provides drinking water, wastewater, and other water related services in more than 30 states. Pennsylvania-based Aqua America (WTR) is another major water utility company with operations in over 20 states.
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