Multi-Million Dollar Hedge Fund Focusing on Water, Utilities: American Water Works Company Inc (AWK), SJW Corp. (SJW)

While earnings per share have been constant since 2010 for the water-centric holding company, SJW is trading at a moderately attractive 23.47 P/E, and a very enticing 8.29% ROE–well above the industry average by more than two percentage points.

The company, whose holdings include San Jose Water Company and the Texas Water Alliance, has seen steady upward movement in its stock price. Indeed, over the past year the stock is up 21.41%, and SJW recently reported an operating revenue increase of $22.6 million for 2012–a boost of 9.5% from the previous year. The stock’s 2.63% dividend yield isn’t mind-blowing, but its 44-year streak of dividend payments is an encouraging history for the long-term income investor.

Pentair, Ltd. (NYSE:PNR) and Itron, Inc. (NASDAQ:ITRI) are the fourth and fifth largest holdings in Summit Global’s equity portfolio, worth 6.18% and 6.12% of the fund’s total 13F capital, respectively. Pentair, the industrial manufacturer with a focus on water and fluid solutions, saw aggregate hedge fund interest increase by 8% in the fourth quarter, with prominent names like Cliff Asness and George Soros (see Soros’s full equity portfolio here) establishing new positions. The stock trades at a fairly attractive earnings multiple of 13x, and sports a dividend yield (1.8%) that’s more generous than 80% of the entire industrial goods sector.

Meanwhile, the natural gas meter technology company, Itron, has quality ROI figures–presently at 7.01% versus peer averages near 4%–and a return on equity above 11% indicates that its efficiency is over twice that of industry norms. Wall Street’s average price target on Itron indicates that an upside of 7-8% is expected from current levels.

Each of these stocks represents a promising play moving forward, and it’s not difficult to see that the predominant macro-level theme in Dickerson’s equity portfolio–water–sheds light on a space that retail investors should take a look at as well.

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