Investing in Water – Be Ready

Trend: Technologies for managing water and wastewater will be part of the infrastructure improvement stimulus package.

Nick Hodge at Energy & Capital describes opportunities for investing in water. Excerpts below.

Link: Water Stocks.

Water Stocks

The sector can be broken down into three basic vehicles for investment:

1. Water utilities

2. Water ETFs & funds

3. Water infrastructure and related companies

Your investment goals should dictate which sector you go after.

Looking for slow, incremental growth and dividends? Check out water utilities.

After long-term value and steady growth? Try water ETFs and funds.

More often than not, I seek out the best water stocks with the highest growth scenarios, most advanced products and services, and the best chance to capitalize on niche solutions to big water problems.

Here are a few of the companies in that position right now, along with their specialty:

• Layne Christensen (NASDAQ: LAYN), wastewater treatment, source identification, pipeline rehabilitation

• Tetra Tech Inc. (NASDAQ: TTEK), water quality assessments, pollution remediation and control

• Flowserve Corp. (NYSE: FLS), pumps, valves, seals, systems automation

• Insituform Technologies (NASDAQ: INSU), in-ground pipe rehabilitation and replacement

Water stocks are great for some investment objectives. For others, a managed fund or ETF is in order.

Water ETFs

Here's a list of the four main water exchange traded funds (ETFs) on the market:

• PowerShares Water Resources (NYSE: PHO)

• PowerShares Global Water (NYSE: PIO)

• Claymore S&P Global Water (NYSE: CGW)

• First Trust ISE Water (NYSE: FIW)

...these ETFs have traded down with the broader market, even though some of the companies they hold have performed much better. Such is the drawback of an ETF.

But this group of funds does still hold promise, especially if you believe the market has found a bottom.  

I've exhaustively researched the top ten holdings of each of these water funds. And I found some interesting trends.

Most notably, I found the the same few stocks continually appear in the top ten holdings of each ETF, namely Tetra Tech (NASDAQ: TTEK), ITT Corp. (NYSE: ITT), Veolia Environment (NYSE: VE), and Nalco Holding (NYSE: NLC).