Freshwater — everyone needs it but, water scarcity and water shortages are becoming increasingly common. Suitable drinking water is necessary for life yet only 2.5% of the world’s water supply is freshwater.
Many regions of the world can’t readily access these potable water sources. This is where water companies are working to improve freshwater disbursement throughout the world and capitalize on the demand that exists.
Learn how investing money in water could help your portfolio grow in size while supporting companies looking to solve the water crisis we face today.
How to invest in water
There are numerous ways to invest in water that include buying individual stocks, stock funds, and indexes. There is more to invest in than just buying stocks directly related to freshwater development and distribution. You can also invest in the companies that support water distribution companies with supplies, testing, and equipment.
You could find great opportunities to invest in water when you investigate the companies tracked in four popular water indexes. You can also just invest in one of the indexes itself to quickly achieve diversification across a portfolio of water stocks. An index fund is a mutual fund or exchange-traded fund (ETF) that seeks to replicate the performance of a stock or bond market index.
Take a look at the four popular water indexes:
- The Dow Jones U.S. Water Index (DJUSWU): A Dow Jones large cap index with approximately 29 domestic and international stocks.
- The ISE Clean Edge Water Index (HHO): A Nasdaq index composed of 32 stocks in the water industry. Companies include those involved in water distribution, infrastructure, water solutions, and ancillary services.
- The S&P 1500 Water Utilities Index ($XYBH): A small index that monitors companies that focus on water distribution and wastewater management.
- The S&P Global Water Index (CGW): An S&P index with 50 companies involved in utilities, water infrastructure, equipment, instruments, and materials. Approximately half are U.S. companies.
11 ways to invest in water
If you are looking for more targeted water investment opportunities, you can look to specific stocks, mutual funds, or ETFs to invest in. We’ve highlighted 11 stocks and funds that are directly and indirectly involved in the distribution and management of freshwater resources.
Please note that investing in water-related businesses, as with any investment, has risk. Past performance is not an indication or promise of future results.
1. General Electric (GE)
GE is known for its history of invention, mainly having to do with power, renewable energy, aviation, and health care. It is a diversified company with its hands in many different technologies.
You may not think about GE when it comes to water, but it has a technology called Non-Thermal Brine Concentrator (NTBC) that helps eliminate wastewater streams found in industrial operations. This technology turns billions of gallons of lost water into clean water. Tests boast that this technology is able to recapture nearly 100% of wastewater from a bottling plant.
GE is a stock with a long history of success that has worked hard to revamp itself as energy needs have changed. This stock is for investors willing to be patient while the company redefines itself.
2. Pax Global Environmental Markets Fund (PGINX)
If you’re looking for a diversified ready-made portfolio of water stocks, the Pax Global Environmental Markets fund could be for you. It boasts a portfolio that includes stocks related to alternative energy resources, sustainable food, and waste management technologies. When it comes to water, the fund dives deep into infrastructure and pollution control.
Its top 10 holdings include American Water Works (AWK) with about 8% of the fund devoted to utilities. This fund offers investors room for growth with large- and mid-cap companies bringing innovation to the water market.
3. Waters Corporation (WAT)
A company that takes testing to the next level is Waters Corporation. It provides various methods that include high-performance liquid chromatography (HPLC), ultra-performance liquid chromatography, and mass spectrometry (MS), to name a few. These are used to help separate and quantify the various components of liquid samples. One of its applications is testing water sources for pollutants and toxins.
This is a reliable company that has been around for decades, so investors might feel they could benefit from the long-term consistency of the stock.
4. Invesco S&P Global Water Index ETF (CGW)
This is an ETF with approximately 50 companies. The Invesco S&P Global Water Index has holdings in major utilities, infrastructure, equipment, and instruments. The majority of the fund’s companies are U.S. based. The international component of the fund has stocks from countries such as the U.K., France, and Switzerland. Water utility companies make up about 40% of the fund.
The majority of the investment goes into mid-cap stocks. Top stocks in the fund include American Water Works (AWK), Xylem Inc (XYL), Halma PLC (HLMA LN), and Geberit AG (GEBN SW).
This could be a smart investment for someone looking for a diversified international portfolio with a long-term time horizon.
5. American Water Works (AWK)
American Water Works trades on the New York Stock Exchange and is considered a company in the utilities industry. It serves utilities with water line protection and sewer line protection. It also has an in-home plumbing emergency program for consumers. This is a large-cap dividend-paying company that continues to grow as improvements are sought for the U.S. water system.
American Water Works currently services 16 states and 1,700 communities across the country. It’s portfolio of assets include:
- 79 surface water treatment plans
- 530 groundwater treatment plants
- 150 wastewater treatment plants
- More than 53,000 miles of transmission, distribution, and collection mains and pipes
Although this company has only been public since 2008, it has a history of profitability. In fact, it has increased its dividend payout every year since going public.
6. Danaher Corporation (DHR)
Danaher Corporation designs and manufactures professional, medical, industrial, and commercial products. One of its systems, Trojan Technologies, helps with municipal wastewater management, drinking water distribution, and environmental containment treatment. The company is an integral partner for many communities in drinking water purification.
Danaher’s technologies are used to help determine whether water is potable and free from contaminants. It’s used to analyze and treat water everywhere from municipalities and wastewater treatment facilities to lakes, streams, and oceans.
This is a Nasdaq stock with favorable growth expectations from many Wall Street stock market analysts.
7. Invesco Water Resources ETF (PHO)
The Invesco Water Resources ETF primarily invests in common stocks, American depositary receipts (ADRs), and global depositary receipts (GDRs) focused on water conservation. The companies it invests in help to conserve and purify water in both homes and businesses. It does this by investing in sub-industries such as machinery, water utilities, and life sciences tools.
The top holdings for the Invesco Water Resources ETF include Ecolab, Roper Technologies, Danaher Corp, American Water Works, and Waters Corp. Although the company has about a 23% large-cap stock base, it is primarily a mid-cap and small-cap stock ETF.
8. Ecolab Inc (ECL)
A subsidiary of Ecolab, Nalco Water, is an industry leader for water treatment and waste management solutions. It works to improve the processes that organizations utilize, implementing pollutant control solutions. Nalco Water partners with industrial markets on water purification solutions, thus reducing its environmental impact.
Ecolab trades on the NYSE and pays an annual dividend. It could be a fit for investors seeking a long-term play on a stock that will also be income producing.
9. Roper Technologies Inc (ROP)
Roper Technologies is a diversified company that works in many industries including air separation, oil and gas, power generation, and water/wastewater treatment. The Industrial Technology segment of the company produces water and fluid handling pumps, leak testing equipment, and water meter products and systems.
One of Roper Technologies’ subsidiaries, Neptune Technology Group, works with more than 4,000 water utilities in North America providing software and measurement solutions integrated into a smart network.
This stock is in the S&P 500 and is considered a Fortune 500 stock. It could be a fit for an investor seeking to take advantage of a value stock as part of a values-based investing strategy.
10. Zurn Water Solutions Corp (ZSW)
Zurn Water Solutions works with consumers, businesses, and industries with water control, flow systems, and commercial plumbing products, including faucets and fixtures. It is dedicated to helping customers conserve water resources and helping companies exceed regulatory compliance when it comes to implementation.
Zurn estimates that nearly 34 billion gallons of water will be saved in 2021 because of the products manufactured and distributed by the company. Zurn Water Solutions trades on the NYSE and could be a fit for those willing to take some risk with their portfolio.
11. Advanced Drainage Systems Inc (WMS)
Advanced Drainage Systems supports those needing water drainage solutions. It manufactures and sells polypropylene and polyethylene pipes, leach field chambers, septic tanks, and accessories. Many of its pipes are made from recycled materials, adding to the positive environmental impact the company makes as a whole.
This company stock trades on the NYSE. The stock has seen extraordinary growth with the coronavirus pandemic thanks to its business continuity structure and growth in the construction and agriculture industries. It could be a good fit for someone looking to diversify their water holdings with an infrastructure stock.
The pros and cons of investing in water
Investors should weigh investment options thoroughly before making an investment decision. As with all investments, buying water securities can be risky. Consider your time horizon and risk tolerance before buying water stocks and securities.
Here are some pros and cons to consider when it comes to investing in water.
Pros of investing in water
- Play a role in environmental stewardship
- Opportunity to diversify your portfolio
- Ability to invest in cutting edge water technology in some cases
Cons of investing in water
- Subject to greater risk and are greatly impacted by market volatility
- Difficult to research in some cases
- Can be impacted by political and economic instability
Is water a good investment?
Water could be a good investment for those who want to see long-term gains in an industry where they can also have a positive environmental impact. Profits could be possible. For example, an investment in the Invesco S&P; Global Water Index ETF (CGW) went up more than 109% over a five-year period from 2017 to 2021.
Investors should realize, though, that investing in water or the industries supporting water conservation and distribution are heavily affected by market volatility, political unrest, and economic trends.
Can I invest in water as a commodity?
Investing in water as a commodity is certainly an option for investors seeking to diversify their portfolio with a commodity needed by the entire world’s population. Those who want to invest directly in the commodity could invest in utility companies or bottling companies that provide water to consumers. Investors could also seek options for desalination plants that produce potable water resources.
Who is the biggest water company?
American Water Works (AWK) is the largest publicly-traded water company in the U.S. The company has approximately 7,000 employees and distributes water to more than 15 million people in 46 states. It’s market capitalization sits at $31.4 billion dollars as of November 2021.
More and more people are realizing that investing in water is not only feasible, but a great way to incorporate ecologically sustainable methods into their investment portfolio.
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