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Being the most essential element for life on earth, water needs to be conserved. This is because the gap between water demand and supply has been growing rapidly and the International Food Policy Research Institute expects it to rise to 40% over the next 15 years.
Climate change, drought conditions, pollution, poor sanitation, an ever-expanding population, and increasing consumption have resulted in water scarcity in many parts of the world. Wastewater runoff from agriculture, industry, and expanding cities, especially in developing nations, is another major issue. According to the latest report from UNESCO, about 3.6 billion people are estimated to be living in areas with a potential for water scarcity for at least one month per year, and this number could rise to as many as 5.7 billion people by 2050.
Global demand for water has been rising at a rate of 1% annually, and would continue to grow significantly during the next 20 years, per United Nations. Notably, about 70% of the total demand comes from irrigation whereas demand from industrial applications and domestic households account for about 22% and 8%, respectively.
Given the scarcity of water, both emerging markets and the United States have increased their spending on water and wastewater treatment equipment. In fact, emerging markets account for half of the total infrastructure spending worldwide with China leading the way. China has enacted new water pollution prevention and control law this year, which includes resource protection, waterline management, pollution prevention and control, and ecological restoration.
Donald Trump’s 2019 budget proposal includes an initiative that would save $350 billion for drinking water pipes to guarantee that there is no another Flint, Michigan-style water crisis in the coming few years (read: Trump's 2019 Budget Blueprint: ETF Winners & Losers).
Per Grand View Research, spending on global water and wastewater treatment is set to boom to $10341 billion by 2025 from $628 billion in 2015. Additionally, recycling wastewater can ease global water shortages while protecting the environment.
Given this, water could be an important growth industry and an excellent investing area as utility operators are putting their money in this corner to meet growing global demand for fresh water. We have highlighted some ETFs and stocks that could be excellent picks to tap this growing opportunity.
PowerShares Water Resources Portfolio (PHO - Free Report)
This fund provides exposure to U.S. water utility stocks that create products to conserve and purify water for homes, businesses and industries. It tracks the Nasdaq OMX US Water index and holds 35 securities in the basket with none accounting for more than 8.1% of the assets. The fund has amassed $852.1 million in AUM and charges 62 bps a year in fees (read: Will Infrastructure ETFs Get a Boost from Trump's Plan?).
Guggenheim S&P Global Water Index ETF (CGW - Free Report)
This ETF provides global exposure by tracking the S&P Global Water Index. It holds 55 stocks in its basket with each holding no more than 8.1% share. The fund has managed assets of $611.2 million and charges 63 bps in annual fees from investors. In terms of country exposure, American stocks make up for nearly 47.8% of the assets followed by United Kingdom with 11.6% share.
This product also offers global exposure and tracks the NASDAQ OMX Global Water Index. Holding 42 stocks in its basket, it is moderately concentrated across components with each holding under 8.3% share. From a country perspective, United States takes the top spot at 38% while United Kingdom, Switzerland and France round off the next three with a double-digit exposure each. PIO has AUM of $186.9 million and expense ratio of 0.75% (see: all the Industrial ETFs here).
This Delaware-based company provides water, wastewater, and other services on the Delmarva Peninsula. The company has seen positive earnings estimates revision of 6 cents over the past 90 days for this year. The stock has a Zacks Rank #2 (Buy) and a VGM Score of C. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AquaVenture Holdings Limited
This British Virgin Islands-based company provides water-as-a-service solutions in North America, the Caribbean, and South America, and offers clean drinking and process water. It has seen solid earnings estimate revision of 5 cents over the past 90 days for this year and has an estimated growth rate of 24.49%. The stock carries a Zacks Rank #2 and a VGM Score of C.
This California-based company provides water and electric services to residential, industrial, and other customers in the United States. It has seen positive earnings estimate revision of a penny over the past 90 days for this year and has an estimated growth rate of 4.68%. The stock has a Zacks Rank #2 and a VGM Score of F.
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Dive Into These ETFs & Stocks on World Water Day
Being the most essential element for life on earth, water needs to be conserved. This is because the gap between water demand and supply has been growing rapidly and the International Food Policy Research Institute expects it to rise to 40% over the next 15 years.
Climate change, drought conditions, pollution, poor sanitation, an ever-expanding population, and increasing consumption have resulted in water scarcity in many parts of the world. Wastewater runoff from agriculture, industry, and expanding cities, especially in developing nations, is another major issue. According to the latest report from UNESCO, about 3.6 billion people are estimated to be living in areas with a potential for water scarcity for at least one month per year, and this number could rise to as many as 5.7 billion people by 2050.
Global demand for water has been rising at a rate of 1% annually, and would continue to grow significantly during the next 20 years, per United Nations. Notably, about 70% of the total demand comes from irrigation whereas demand from industrial applications and domestic households account for about 22% and 8%, respectively.
Given the scarcity of water, both emerging markets and the United States have increased their spending on water and wastewater treatment equipment. In fact, emerging markets account for half of the total infrastructure spending worldwide with China leading the way. China has enacted new water pollution prevention and control law this year, which includes resource protection, waterline management, pollution prevention and control, and ecological restoration.
Donald Trump’s 2019 budget proposal includes an initiative that would save $350 billion for drinking water pipes to guarantee that there is no another Flint, Michigan-style water crisis in the coming few years (read: Trump's 2019 Budget Blueprint: ETF Winners & Losers).
Per Grand View Research, spending on global water and wastewater treatment is set to boom to $10341 billion by 2025 from $628 billion in 2015. Additionally, recycling wastewater can ease global water shortages while protecting the environment.
Given this, water could be an important growth industry and an excellent investing area as utility operators are putting their money in this corner to meet growing global demand for fresh water. We have highlighted some ETFs and stocks that could be excellent picks to tap this growing opportunity.
PowerShares Water Resources Portfolio (PHO - Free Report)
This fund provides exposure to U.S. water utility stocks that create products to conserve and purify water for homes, businesses and industries. It tracks the Nasdaq OMX US Water index and holds 35 securities in the basket with none accounting for more than 8.1% of the assets. The fund has amassed $852.1 million in AUM and charges 62 bps a year in fees (read: Will Infrastructure ETFs Get a Boost from Trump's Plan?).
Guggenheim S&P Global Water Index ETF (CGW - Free Report)
This ETF provides global exposure by tracking the S&P Global Water Index. It holds 55 stocks in its basket with each holding no more than 8.1% share. The fund has managed assets of $611.2 million and charges 63 bps in annual fees from investors. In terms of country exposure, American stocks make up for nearly 47.8% of the assets followed by United Kingdom with 11.6% share.
PowerShares Global Water Portfolio (PIO - Free Report)
This product also offers global exposure and tracks the NASDAQ OMX Global Water Index. Holding 42 stocks in its basket, it is moderately concentrated across components with each holding under 8.3% share. From a country perspective, United States takes the top spot at 38% while United Kingdom, Switzerland and France round off the next three with a double-digit exposure each. PIO has AUM of $186.9 million and expense ratio of 0.75% (see: all the Industrial ETFs here).
Artesian Resources Corporation (ARTNA - Free Report)
This Delaware-based company provides water, wastewater, and other services on the Delmarva Peninsula. The company has seen positive earnings estimates revision of 6 cents over the past 90 days for this year. The stock has a Zacks Rank #2 (Buy) and a VGM Score of C. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AquaVenture Holdings Limited
This British Virgin Islands-based company provides water-as-a-service solutions in North America, the Caribbean, and South America, and offers clean drinking and process water. It has seen solid earnings estimate revision of 5 cents over the past 90 days for this year and has an estimated growth rate of 24.49%. The stock carries a Zacks Rank #2 and a VGM Score of C.
American States Water Company (AWR - Free Report)
This California-based company provides water and electric services to residential, industrial, and other customers in the United States. It has seen positive earnings estimate revision of a penny over the past 90 days for this year and has an estimated growth rate of 4.68%. The stock has a Zacks Rank #2 and a VGM Score of F.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>