This ETF Is Poised to Benefit From an Inevitable Trend: Powershares Water Resource Portfolio (PHO), Companhia de Saneamento Basico (ADR) (SBS), California Water Service Group (CWT)

Page 1 of 2

California Water Service Group (NYSE: CWT)For the sophisticated investor, exchange traded funds are often looked down upon. After all, part of the benefit of taking control of your personal investments is to cut back on as many performance-deflating expenses as possible. Plus, the diversification that ETF creators tout comes with a corresponding negative: both the best and worst companies in a particular industry or index are part of the ETF. So why would an in investor that is knowledgeable enough to handpick stocks ever want to pay annual expenses for a basket of stocks including industry laggards?

The trend behind the ETF is too powerful to ignore

Some investment theses are so universal that every company in the industry stands to benefit. Such is the case with water — nothing is as essential to the basics of human life, and the statistics around water scarcity are quite clear. Currently, a billion people do not have sufficient access to fresh water. This alarming statistic is projected to compound both as populations continue to swell and developing countries continue to increase the use of water for agriculture and industry. Based on a World Water Assessment Programme study, 70% of fresh water usage goes towards irrigation, while another 22% is consumed by industry. Only the remaining 8% of fresh water being used is for domestic use.

This isn’t intended to be a public service announcement or political statement. Instead, these facts point strongly towards a water shortage that will cause water to live up to the nickname “blue gold” that has been increasingly used in recent years. Quite simply, the necessity of water and a convergence of several inevitable trends will make fresh water a more valuable and strategic resource in the future than most consider it to be today.

How to invest in the coming water shortage

There are a number of different approaches to investing in water-related businesses. The most obvious is an investment in utilities that provide water to consumers and businesses. For investors more focused on steady performance and income, California Water Service Group (NYSE:CWT) provides growing returns in a regulated environment. Layering on emerging market growth to the water utility investment thesis, Companhia de Saneamento Basico do Estado de Sao Paulo (ADR) (NYSE:SBS) has outperformed the market in recent years as population and industry growth in Brazil has driven an ever-increasing need for water.

If the standard water utility is too boring, investors looking to think outside the box might consider Consolidated Water Co. Ltd. (NASDAQ:CWCO), a Cayman Islands-based water utility that is a leader in developing desalination technology. Desalination converts salt water into fresh water, which potentially opens a huge opportunity to meet growing fresh water needs with the ample water found in oceans across the world.

In addition to the provision of water, companies that make the infrastructure that moves water and improves efficiency are also worth a look. For example, pump manufacturer Flowserve and smart meter provider Itron, Inc. (NASDAQ:ITRI) address the growing need to transport water, track consumption, and improve efficiency.

Not sure which investment is best? Try them all!

Each of the five companies mentioned above stand to benefit from the growing demand for, and scarcity of, fresh water. Perhaps one jumps out as the clear long-term winner. If the decision isn’t so clear, it makes a lot of sense to consider Powershares Water Resource Portfolio (NYSEMKT: PHO). Powershares Water Resource Portfolio (NYSEMKT:PHO) is an ETF devoted to tracking the NASDAQ OMX US Water Index. Among its 37 holdings, SBS and Flowserve are the two largest holdings.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!