In this article, we discuss 10 best water stocks to buy.

As of November 10, 84% of the water and sewer ratings assigned by Fitch had a Stable Rating Outlook. Nearly 14% have a Positive Rating Outlook or are on Rating Watch Positive, and only 3% have a Negative Rating Outlook or are on Rating Watch Negative. The global functional water market was worth $15.1 billion in 2022. Moving forward, IMARC Group forecasts the market to reach $24.8 billion by 2028, indicating a growth rate of 7% during 2023-2028.

Concerns of economic slowdown, the war in Ukraine, lockdowns in China, and the threats of stagflation facing the global market are pressuring the water industry players to be highly vigilant, control costs, and adopt cutting edge technology. The water sector is one of the most defensive plays in the current market, as demand for drinking water and other water services will never diminish regardless of the economic backdrop. As investors actively seek out defensive equities to secure their portfolios, they can benefit from the water industry, which is ever evolving. The global population has recently hit 8 billion, which means demand for water will continue to increase. To benefit from the growing sector, some of the best water stocks to invest in include American Water Works Company, Inc. (NYSE:AWK), Essential Utilities, Inc. (NASDAQ:WTRG), and Primo Water Corporation (NYSE:PRMW). 

Our Methodology 

We selected the following water stocks based on positive analyst coverage, strong business fundamentals, and market visibility. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022. The list is arranged according to the number of hedge fund holders in each firm. 

Best Water Stocks To Buy

10. Artesian Resources Corporation (NASDAQ:ARTNA)

Number of Hedge Fund Holders: 5

Artesian Resources Corporation (NASDAQ:ARTNA) was founded in 1905 and is headquartered in Newark, Delaware. The company provides water, wastewater, and other services in Delaware, Maryland, and Pennsylvania. It distributes water to residential, commercial, industrial, governmental, municipal, and utility customers. Additionally, Artesian Resources Corporation (NASDAQ:ARTNA) specializes in wastewater collection, treatment infrastructure, and wastewater services for customers in Delaware. 

On November 3, Artesian Resources Corporation (NASDAQ:ARTNA) reported a Q3 GAAP EPS of $0.65 and a revenue of $26.58 million, up 6.7% on a year-over-year basis. On November 4, Artesian Resources Corporation (NASDAQ:ARTNA) declared a $0.2784 per share quarterly dividend, a 2% increase from its prior dividend of $0.2729. The dividend was paid to shareholders on November 23. The dividend yield on December 13 came in at 2.01%. 

According to Insider Monkey’s third quarter database, 5 hedge funds were long Artesian Resources Corporation (NASDAQ:ARTNA), with combined stakes worth $17.86 million, compared to 2 funds in the prior quarter worth $17.72 million. Jim Simons’ Renaissance Technologies is the largest stakeholder of the company, with 319,111 shares worth $15.35 million. 

Like American Water Works Company, Inc. (NYSE:AWK), Essential Utilities, Inc. (NASDAQ:WTRG), and Primo Water Corporation (NYSE:PRMW), Artesian Resources Corporation (NASDAQ:ARTNA) is one of the best water stocks to invest in. 

9. The York Water Company (NASDAQ:YORW)

Number of Hedge Fund Holders: 9

The York Water Company (NASDAQ:YORW) was incorporated in 1816 and is based in York, Pennsylvania. The company impounds, purifies, and distributes drinking water. It owns and operates wastewater collection systems, wastewater treatment systems, reservoirs, water pipelines, and groundwater wells. The York Water Company (NASDAQ:YORW) serves customers in the fixtures and furniture, electrical machinery, food products, paper, ordnance units, textile products, air conditioning systems, laundry detergents, barbells, and motorcycle industries. The York Water Company (NASDAQ:YORW) is one of the best water stocks to invest in. 

On November 3, The York Water Company (NASDAQ:YORW) reported Q3 GAAP earnings per share of $0.40, beating market estimates by $0.02. The revenue came in at $15.81 million, up 9% year-over-year, exceeding Wall Street consensus by $0.81 million. 

According to Insider Monkey’s data, The York Water Company (NASDAQ:YORW) was part of 9 hedge fund portfolios at the end of the third quarter of 2022, compared to 7 in the prior quarter. Stuart J. Zimmer’s Zimmer Partners held the biggest stake in the company, with 589,781 shares worth $22.6 million. 

8. SJW Group (NYSE:SJW)

Number of Hedge Fund Holders: 9

SJW Group (NYSE:SJW) provides water utility services in the United States. It specializes in the production, purchase, storage, purification, distribution, wholesale, and retail sale of water and wastewater services. SJW Group (NYSE:SJW) was incorporated in 1985 and is headquartered in San Jose, California. SJW Group (NYSE:SJW) paid a $0.36 per share quarterly dividend to shareholders on December 1. It is one of the premier water stocks to monitor. 

On October 28, SJW Group (NYSE:SJW) reported a Q3 GAAP EPS of $0.82 and a revenue of $176 million, outperforming Wall Street forecasts by $0.05 and $4 million, respectively. The company reaffirmed the full-year 2022 guidance range of $2.30 to $2.40 earnings per diluted share, versus a consensus of $2.37. SJW Group (NYSE:SJW) expects regulated infrastructure investments of approximately $223 million in 2022.

UBS analyst Gregg Orrill initiated coverage of SJW Group (NYSE:SJW) on November 30 with a Buy rating and an $85 price target as part of a broader research note on Water Utilities titled “Looking for Value”. Water utilities have attractive characteristics for a defensive market backdrop and offer optimistic fundamentals, including 7% EPS growth potential and meaningful investment opportunities from pipe replacement and water access, the analyst wrote in a research note. He added that stock trades at a 5% discount to the sector on a price to earnings basis despite higher regulatory clarity than its competitors and an adequate water supply.

According to Insider Monkey’s Q3 data, 9 hedge funds were bullish on SJW Group (NYSE:SJW), compared to 8 funds in the last quarter. Israel Englander’s Millennium Management is a prominent stakeholder of the company, with 206,878 shares worth about $12 million. 

7. Middlesex Water Company (NASDAQ:MSEX)

Number of Hedge Fund Holders: 9

Middlesex Water Company (NASDAQ:MSEX) was incorporated in 1896 and is headquartered in Iselin, New Jersey. The company owns and operates regulated water utility and wastewater systems. It operates in two segments, Regulated and Non-Regulated. The company provides water services on a retail and wholesale basis to residential, commercial, industrial, and fire protection customers, in addition to providing regulated wastewater systems in New Jersey and Delaware. It is one of the best water stocks to consider. 

On October 24, Middlesex Water Company (NASDAQ:MSEX) announced a $0.3125 per share annual dividend, a 7.8% increase from its prior dividend of $0.29. The dividend was distributed to shareholders on December 1. The company’s Q3 revenue of $47.73 million climbed nearly 20% year-over-year, beating market estimates by $0.73 million.

Baird analyst Ben Kallo on May 2, 2022 maintained an Outperform rating on Middlesex Water Company (NASDAQ:MSEX) but lowered the price target on the shares to $99 from $102. The company estimates that it will invest roughly $229 million over the next three years providing a runway for increasing earnings and the first stage of its rate hike in New Jersey should help drive growth, the analyst told investors in a research note. 

According to Insider Monkey’s data, 9 hedge funds held long positions in Middlesex Water Company (NASDAQ:MSEX) at the end of Q3 2022, compared to 11 funds in the prior quarter. D E Shaw is a significant stakeholder of the company, with 18,856 shares worth $1.45 million. 

6. California Water Service Group (NYSE:CWT)

Number of Hedge Fund Holders: 15

California Water Service Group (NYSE:CWT) is a provider of water utility and related services in California, Washington, New Mexico, Hawaii, and Texas. The company is involved in the production, treatment, testing, and distribution of water for domestic, industrial, public, irrigation, and fire protection purposes. On November 23, Washington Water Service, a subsidiary of California Water Service Group (NYSE:CWT), announced that it has acquired Driftwood Valley Association’s water system assets. Washington Water plans to invest further in local water system infrastructure to maintain a reliable supply of clean water to customers for their everyday needs and to firefighters for emergencies.

On November 30, UBS analyst Gregg Orrill initiated coverage of California Water Service Group (NYSE:CWT) with a Neutral rating and a $67 price target. Water utilities have attractive characteristics and they are defensive plays, offering positive fundamentals such as 7% EPS growth potential and significant investment opportunities, the analyst told investors. 

According to Insider Monkey’s data, 15 hedge funds were bullish on California Water Service Group (NYSE:CWT) at the end of September 2022, compared to 12 funds in the last quarter. Ian Simm’s Impax Asset Management is the largest stakeholder of the company, with 1.5 million shares worth $82 million. 

In addition to American Water Works Company, Inc. (NYSE:AWK), Essential Utilities, Inc. (NASDAQ:WTRG), and Primo Water Corporation (NYSE:PRMW), California Water Service Group (NYSE:CWT) is one of the premier stocks for exposure to the water sector.

5. Pennon Group Plc (OTC:PEGRF) 

Number of Hedge Fund Holders: N/A

Pennon Group Plc (OTC:PEGRF) was incorporated in 1989 and is based in Exeter, the United Kingdom. The company provides water and wastewater services for customers in Cornwall, Devon, and parts of Dorset and Somerset, water-only services in Dorset, Hampshire, and Wiltshire, and water and wastewater retail services to non-household customers in Great Britain. On November 30, Pennon Group Plc (OTC:PEGRF) posted a 1H non-GAAP EPS of 7.9p and a revenue of £425.5 million, up 9.3% year-over-year. 

On October 4, RBC Capital analyst Alexander Wheeler upgraded Pennon Group Plc (OTC:PEGRF) to Outperform from Sector Perform with a price target of 975 GBp, down from 1,050 GBp. The analyst sees “significant value” at present share levels despite the continuous environmental investigation. The company has constantly been the top performer in the water sector on returns, “and we do not believe that will change overnight,” the analyst wrote in a research note. He said the stock is “too cheap to ignore.”

4. Xylem Inc. (NYSE:XYL)

Number of Hedge Fund Holders: 22

Xylem Inc. (NYSE:XYL) is a New York-based company that engages in the design, manufacture, and servicing of engineered products and services for water and wastewater applications in the United States, Europe, the Asia Pacific, and internationally. The company operates through three segments – Water Infrastructure, Applied Water, and Measurement & Control Solutions. 

On November 10, Xylem Inc. (NYSE:XYL) declared a $0.30 per share quarterly dividend, in line with previous. The dividend is payable on December 20, to shareholders of record on November 22. It is one of the best water stocks to invest in. 

Citi analyst Andrew Kaplowitz on December 9 raised the price target on Xylem Inc. (NYSE:XYL) to $123 from $109 and kept a Neutral rating on the shares. The analyst said mega-trends and “still emerging fiscal tailwinds” should help moderate potential downside for industrials in a slowing macro-economic environment. 

Among the hedge funds tracked by Insider Monkey, Xylem Inc. (NYSE:XYL) was part of 22 public stock portfolios at the end of Q3 2022, compared to 25 in the prior quarter. Ian Simm’s Impax Asset Management is the biggest position holder in the company, with 1.12 million shares worth $98.2 million. 

Aristotle Capital made the following comment about Xylem Inc. (NYSE:XYL) in its Q3 2022 investor letter:

“Xylem Inc. (NYSE:XYL), the water equipment and services supplier, was a leading contributor for the quarter. The company’s solutions and technology continue to enjoy strong global demand as public utilities, as well as industrial, commercial and residential clients, seek solutions to treat, test, transport and preserve water. Similar to other industries, Xylem’s business has been impacted in the short term by the effects of inflation and chip‐supply constraints (that are now moderating), leading to an increasing backlog that has delayed the ability to fulfill orders. We believe Xylem’s portfolio of highly differentiated pumps, recognized for their quality and critical uses, as well as the company’s ability to cross‐sell and link other products, such as sensors and smart meters, will make it a one‐stop shop for utilities and protect the company from pure price competition. In our opinion, long‐term trends, such as water scarcity and the need to replace aging water infrastructure, create strong underlying demand for Xylem’s products through various parts of the economic cycle.”

3. Essential Utilities, Inc. (NASDAQ:WTRG)

Number of Hedge Fund Holders: 29

Essential Utilities, Inc. (NASDAQ:WTRG) is a Pennsylvania-based company that operates regulated utilities that provide water, wastewater, and natural gas services in the United States. It offers water services through operating and maintenance contracts with municipal authorities and third parties. The company posted market-beating Q3 2022 results and reaffirmed its FY 2022 guidance.

On December 7, Essential Utilities, Inc. (NASDAQ:WTRG) declared a $0.287 per share quarterly dividend, in line with previous. The dividend is payable on March 1, 2023 to shareholders of record on February 10. It is one of the premier water stocks to consider. 

According to Insider Monkey’s data, 29 hedge funds were long Essential Utilities, Inc. (NASDAQ:WTRG) at the end of Q3 2022, compared to 22 funds in the prior quarter. Israel Englander’s Millennium Management is one of the significant stakeholders of the company, with 1.2 million shares worth $50 million. 

2. Primo Water Corporation (NYSE:PRMW)

Number of Hedge Fund Holders: 30

Primo Water Corporation (NYSE:PRMW) is a Florida-based company that provides pure-play water solutions for residential and commercial customers. It offers bottled water, water dispensers, purified bottled water, mineral water, sparkling and flavored water, filtration equipment, and coffee. On November 10, Primo Water Corporation (NYSE:PRMW) reported a Q3 non-GAAP EPS of $0.22, in-line with market estimates. The revenue of $584.6 million climbed 6.1% year-over-year, beating Wall Street consensus by $6.07 million. 

On November 8, JPMorgan analyst Andrea Teixeira maintained an Overweight rating on Primo Water Corporation (NYSE:PRMW) but lowered the price target on the shares to $18 from $19. The analyst expects the company to report “solid” Q3 results with “resilient” demand. However, incremental currency headwinds will potentially affect sales and profitability, the analyst told investors in a research note.

According to Insider Monkey’s Q3 data, Primo Water Corporation (NYSE:PRMW) was part of 30 hedge fund portfolios, compared to 24 in the prior quarter. Kevin Oram and Peter Uddo’s Praesidium Investment Management is the leading position holder in the company, with 6.4 million shares worth $80.5 million. 

1. American Water Works Company, Inc. (NYSE:AWK)

Number of Hedge Fund Holders: 35

American Water Works Company, Inc. (NYSE:AWK) is a New Jersey-based company that provides water and wastewater services in the United States. On October 31, American Water Works Company, Inc. (NYSE:AWK) reaffirmed its full-year 2022 earnings per share guidance range of $4.39 to $4.49 on a weather normalized basis versus consensus EPS estimate of $4.44. The company has a long-term dividend growth expectation of 7% to 9%. 

On December 8, American Water Works Company, Inc. (NYSE:AWK) declared a $0.655 per share quarterly dividend, in line with previous. The dividend is payable on March 1, 2023 to shareholders of record on February 7. The dividend yield on December 14 came in at 1.65%. 

Wells Fargo analyst Jonathan Reeder on December 14 raised the price target on American Water Works Company, Inc. (NYSE:AWK) to $159 from $149 to reflect higher peer group multiples since his last update, while maintaining an Equal Weight rating on the shares. His outlook for the sector is not as bullish heading into 2023, nor is he outright bearish.

According to Insider Monkey’s data, American Water Works Company, Inc. (NYSE:AWK) was part of 35 hedge fund portfolios at the end of September 2022, compared to 29 in the prior quarter. Charles Montanaro’s Montanaro Asset Management is a prominent stakeholder of the company, with 158,900 shares worth $20.6 million. 

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Disclosure: None. 10 Best Water Stocks To Buy is originally published on Insider Monkey.