Trend: There's no doubt that clean water will be in high demand in the future. However, finding the best investments to leverage this trend has been difficult.
The water ETF PHO has not delivered upon its promise at this point.
Jeffrey McLarty wanted to find stocks that will benefit over the next 50 years as we run out of fresh water. He researched the stocks that are the heaviest components of PHO. Below are excerpts from this excellent in-depth analysis – click on the link below for detailed info.
The list of the heaviest components of PHO ...are: AECOM Technology Corp. (ACM), Valmont Industries Inc. (VMI), Tetra Tech Inc. (TTEK), Lindsay Corp. (LNN), URS Corp. (URS), Veolia Environnement (VE), Danaher Corp. (DHR), Itron Inc. (ITRI), Ameron International Corp. (AMN), Siemans AG (SI), Emerson Electric Co. (EMR), General Electric Company (GE), IDEX Corp. (IEX), Pentair Inc. (PNR), Millipore Corp. (MIL), Roper Industries Inc. (ROP), ITT Corp. (ITT), Badger Meter Inc. (BMI), Layne Christensen Co. (LAYN), Nalco Holding Co. (NLC), Watts Water Technologies Inc. (WTS), Calgon Carbon Corp. (CCC), Franklin Electric Co. Inc. (FELE), Pall Corp. (PLL), Mueller Water Products Inc. (MWA), GormanRupp Co. (GRC), Insituform Technologies Inc. (INSU), Southwest Water Co. (SWWC), and Aqua America Inc. (WTR).
Conclusions & General Observations:
Not a single stock in PHO screamed ‘buy me now,’ but there were lots of different ideas. The companies that are actually in the space, generally concur that there is a shortage of resources ahead, and it is going to drive growth. I'm not sure investing in water infrastructure is a smart way to play the ’scarcity.' I’d rather just invest in the names purifying and filtering. If there was a company desalinating, I’d be all over that - but I didn’t see one here. The metering market seems to be penetrated by two companies, it’s measured to be $6.5B in the U.S., and will likely create a boom followed by a bust in the market. In my opinion, there are some stocks that don’t belong in PHO. There are some poor performing companies, that might belong in PHO, but it is likely that a smart investor wouldn’t want to hold any position in them. ITT And Insituform are both sponsoring different documentaries on raising ‘awareness’ of the world's water problems. They are both scheduled for spring/summer of 2008.