Financhill

Best Water Stocks To Buy Now

Per Page: 24
Company
Market Cap
PE Ratio
Dividend Yield
NSRGY
Nestle SA
252.25B 20.82 3.34%
Last Price:
98.10
View Chart
WTRG
Essential Utilities
10.47B 20.56 3.26%
Last Price:
38.25
View Chart
KO
Coca-Cola
302.42B 28.41 2.73%
Last Price:
70.17
View Chart
SJW
SJW Group
1.9B 21.71 2.72%
Last Price:
58.19
View Chart
AWR
American States Water
3.14B 24.93 2.1%
Last Price:
83.77
View Chart
CWT
California Water Service Group
3.12B 58.33 2.07%
Last Price:
53.08
View Chart
AWK
American Water Works
27.78B 29.10 2.07%
Last Price:
142.57
View Chart
MSEX
Middlesex Water
1.13B 35.99 2.05%
Last Price:
63.35
View Chart
GRC
Gorman-Rupp
1.02B 28.91 1.86%
Last Price:
38.74
View Chart
AOS
A.O. Smith
12.75B 23.69 1.47%
Last Price:
87.40
View Chart
PRMW
Primo Water
4.04B 17.02 1.39%
Last Price:
25.19
View Chart
XYL
Xylem
32.42B 47.84 1.06%
Last Price:
133.47
View Chart
PNR
Pentair PLC
15.87B 25.57 0.95%
Last Price:
95.88
View Chart
STN
Stantec
9.45B 37.52 0.74%
Last Price:
82.81
View Chart
ROP
Roper Technologies
58.41B 42.27 0.54%
Last Price:
544.86
View Chart
No results

How To Invest In Water Stocks

Utility companies have long been considered a vital component of every well-balanced portfolio.

And while they don’t always offer huge potential for capital appreciation, their role as an effective defensive hedge is undoubtedly true.

Indeed, utilities enjoy some unique characteristics that other companies lack, making them a particularly attractive option as a potential investment pick.

Among these is the fact that almost all utility firms operate in a tightly-regulated environment. This acts as a high barrier to entry for any business that wants to break into the industry, shielding existing companies from future competition.

In addition, because they provide basic amenities that are always in demand, utility companies can generate reliable and predictable revenue streams, meaning that they’re able to offer generous dividend payouts to loyal shareholders.   Therefore, utility stocks are favored by many kinds of investors, especially those interested in receiving an income stream from their holdings.

Given this, you might think that all utilities are more or the less the same - but they’re not. In fact, one of the most intriguing utility sectors today is the water industry.   Water is an indispensable necessity for human life and plays a crucial role in many other commercial and industrial applications too.

But despite its apparent ubiquity, our water is disappearing. And as it becomes more scarce, so too it becomes more valuable. For investors, this can present many opportunities.

So, let’s examine why water stocks are so fascinating and why the industry is in such a great position right now.

Water Is Important

Water is perhaps our most precious commodity.

And yet, no matter how much we’re actually reliant on it, our reserves of it are rapidly diminishing. In fact, in some places, they’re running out altogether. Indeed, it can’t be overstated how serious a problem this is: in 2019, one-quarter of the world’s population faced extremely high levels of water stress, while 60% of the globe’s surface fresh water supplies were concentrated in only nine countries.

Growing demand for water has led to withdrawals more than doubling since the 1960s, and, with rising population levels showing no sign of abating, this trend is predicted to only get worse.

Other factors, such as climate change and urbanization, further compound the situation. Rainfall levels have become more variable, but demand continues to increase.

Solving this conundrum will involve a multi-agency response, but, without a doubt, the water industry will take a leading role.

There are solutions to mitigate the water crisis, all of which require a hefty dose of infrastructure building and upgrades, as well as significant injections of cash from governmental bodies.   Indeed, the 2021 Infrastructure Investment & Jobs Act included a provision for $550 billion of new spending, of which $55 billion was allocated to wastewater, drinking water, and storm water funding.

Where there are inflows of new money into an industry, there will always be a revenue bonanza for the companies participating in it.   And this will be no different for the water sector either. The IIJA mandates a whole raft of programs that will need to be worked on in the coming years, including a $15 billion plan to replace some of the nation’s lead piping infrastructure, as well as a $10 billion grant to address water contamination from PFAS pollutants.

Water Will Become More Valuable Over Time

Some academics have proposed a concept known as the “water wars thesis.” This idea asserts the notion that as water scarcity becomes more pronounced, so too will violent conflict escalate around the world.

Indeed, competition over dwindling water resources is already here. For instance, China has been building a series of dams along the Mekong River, primarily in a region known as the Upper Mekong Basin. The problem is that these dams impact communities living in the Lower Mekong Basin - particularly those in Thailand, Vietnam and Myanmar - and who rely on the river as an important source of water and food. And it’s not just China doing this; India has been doing the same to its neighbor Pakistan, while Turkey has been redirecting water from the Tigris and Euphrates rivers, denying it to Iraq and Syria further downstream.

It’s not inconceivable that water could become the new oil, taking on a central geopolitical significance similar to how fossil fuels have over the last half-century. In fact, former Secretary-General of the United Nations, Boutros Boutros-Ghali, once claimed that the next conflagration in the Middle East would be one “fought over water, not politics.

Moreover, looking at any past conflict clearly demonstrates warfare's effect on commodity costs. If water wars do become a feature of geopolitics in the future, the price of this most vital substance will no doubt rise accordingly.

And while the thought of that eventually is unsettling, one thing is for sure: it will make the work that water companies undertake much more valuable, putting an added premium on their already indispensable expertise.

Extraction And Water Treatment Will Increase

Only around 2.5% of the world’s water is designated freshwater, most of which is immobilized in glaciers and frozen ice sheets. Indeed, roughly 96% of all liquid freshwater resides underground, with the rest either on the surface or in the air.

As such, it’s a job just getting the vast majority of freshwater we drink out from the ground and up to where it’s needed. In fact, the Earth’s largest irrigation project, the Great Man-Made River, draws water from the Nubian Sandstone Aquifer System under the Sahara Desert, and channels it to end destinations in and around Libya. The GMMR provides 70% of all freshwater used in that country, and was once described by the man who laid its foundation stone, Muammar Gaddafi, as possibly the Eighth Wonder of the World.

While the GMMR exemplifies the potential scale of operations needed to supply a population with potable water, it’s also a harbinger of the type of project water companies will be involved with in the future.

These massive national infrastructure works will be huge revenue generators for all kinds of utility firms, and will see earnings for water stocks explode in due time.

Water Has A Myriad Of Uses

On average, every American household uses around 300 gallons of water each day, of which about 70% is consumed indoors.

Water is also used in ways that aren’t always obvious to us. Even activities such as mining and the cooling of data centers all require the use of significant quantities of water. In fact, 45% of U.S. freshwater withdrawals are used to create thermoelectric power, while another 32% is used to grow the crops that contribute to our food supply.

Indeed, water is a major component of semiconductor manufacturing too. In this process, ultrapure water is required to cleanse impurities and contaminants from silicon wafers. In fact, the scale of water usage is immense: just a single 8-inch wafer - which makes around 100 chips - needs up to 2,000 gallons of ultrapure water to remove any undesired substances from its surface.

So intense is this procedure that companies are now looking at ways to create novel water recycling systems that reduce their water consumption. For example, Intel is developing a $600 million water reuse facility at its new D1X factory in Hillsboro, Oregon, where it hopes to return 100% of the roughly three billion gallons it uses every year.

Water Is A Growth Industry Too

Although water appears to be an abundant resource in most of the world’s developed nations, that’s becoming less true as time wears on. As a matter of fact, many countries - including the United States - are now beginning to face increasing challenges regarding their access to clean water.

Greater recognition of the urgency with which First World countries need to tackle their own growing water crisis has led to a rise in water monitoring services.

For example, real-time surface water monitoring can assist the industry in better understanding how one aspect of the water cycle impacts another.

Indeed, plenty of companies are developing cutting-edge technologies in this field already. Some, like UK-based Watr, are designing solar-powered floating surface water monitors that can provide water quality data to users in real-time. Others, such as AquaRealTime, are using the Internet-of-Things to create a revolutionary automated early warning system for the detection of harmful algae blooms and other water-borne pollutants.

The benefit of all this innovation is that, for investors, these technologies create additional market demand for their products. This drives new revenue to the space, and acts as a kind of high-growth segment within the wider industry itself.

How To Invest In Water Stocks

One of the easiest ways to invest in the water industry is through a passive index investing strategy. Passive index investing involves a fund manager creating a portfolio that mirrors the securities and assets of a particular index. For example, by purchasing shares in, say, the Invesco S&P Global Water Index ETF, you gain exposure to a wide variety of water-related businesses in different sectors and in other countries. Alternatively, if you don’t require your investments to be as diversified as this, you can choose to allocate your funds to individual stocks and shares instead. This route might be riskier, but if you make the right pick your upside will be greater.

How To Invest In Water Stocks: Closing Thoughts

Scientists believe that the combination of climate change and a rising world population will continue to put pressure on global water supplies.

Indeed, with the likely threat of increasingly severe droughts - and the prospect of “water wars“ between states with and without access to adequate water reserves - it’s almost certain that water will become less abundant rather than more so over the next few decades.

Because of how this interplay between supply and demand will eventually work out, now is the perfect time to invest in water stocks.

The kind of securities you decide to opt for will depend on your own individual portfolio needs, and the level of risk tolerance you're comfortable with. More conservative investors will appreciate the dividend-paying benefits that most large-scale utility firms offer, while growth-minded traders will probably prefer to look for the type of exciting start-up that’s innovating in a water-themed sub-sector.

Investing News

Is Sweetgreen’s Ambitious Growth Plan a Buy?

Is Sweetgreen’s Ambitious Growth Plan a Buy?

Sweetgreen (NYSE: SG) has been a darling of health-conscious urban dwellers for years. Even those who steer clear of salads have often been converted to raving fanatics after trying their tasty options and home-made salad dressings. The most recent quarterly report revealed a mixed bag of news, so is this salad giant now offering investors a […]

Read Article

Squarespace Vs Wix: Which Website Builder Stock Is Best?

Squarespace Vs Wix: Which Website Builder Stock Is Best?

Squarespace (NYSE:SQSP) and Wix (NASDAQ:WIX) are two of the largest website-building platforms in the world. For both individuals and companies, these platforms are default choices for building sites, managing online sales and creating a professional online presence. Which one of these companies, though, is the better investment in today’s market? Is Squarespace Stock Stuck at […]

Read Article

Is Hims & Hers the Next Big Healthcare Stock? Here’s How High It Could Climb

Is Hims & Hers the Next Big Healthcare Stock? Here’s How High It Could Climb

Telehealth company Hims & Hers (NYSE:HIMS) is familiar to most consumers from the virtual ubiquity of its radio, TV and online advertising. Operating as a subscription-based provider of everything from sexual health to weight loss products, Hims & Hers is currently the second-largest public telehealth company in the US by market capitalization. With direct-to-consumer healthcare […]

Read Article

Where Will Veeva Systems Stock Be in 10 Years?

Where Will Veeva Systems Stock Be in 10 Years?

Veeva Systems (NYSE:VEEV), a software solutions provider for the life sciences industry, has seen some weakness amid the slowdown in cloud market demand as organizations cope with macro woes. While the company saw its shares slumping by around 32% over the past three years, the stock is gaining back momentum, with encouraging financial reports showing […]

Read Article

How Did Vitalik Buterin Make His Money?

How Did Vitalik Buterin Make His Money?

Vitalik Buterin has been called one of the first crypto billionaires. The Russian-born computer programmer has lived in Canada since he was a child. His father, also a programmer, introduced Buterin to Bitcoin’s technology when he was 17 years old. Vitalik was immediately obsessed with the potential of blockchain technology, and he quickly devised ways […]

Read Article

Where Will RingCentral Stock Be in 10 Years

Where Will RingCentral Stock Be in 10 Years

As business teams become increasingly global and remote, it can be a challenge to keep an enterprise connected. Teams often use multiple devices and various communication methods in a single session, for example video conferencing and instant messaging. Unified communications is the integration of all those aspects across an organization, which can dramatically improve productivity […]

Read Article

More Investing News

The #1 Stock Analysis Tool to Make Smarter Buy and Sell Decisions

Get started at Financhill, the #1 investment research platform that is your one-stop shop for finding the best trade ideas today.

  • Top Rated Stock Ideas
    Financhill Stock Score is a proprietary stock rating engine that independently evaluates every company based on fundamental, technical, and sentiment criteria so you can find the highest rated stocks in the S&P 500, NASDAQ and NYSE.
  • Best Stock Tools Platform
    Whether you are looking for the best blue chip stocks, top dividend stocks, most shorted stocks, cheapest stocks today, highest dividend stocks or best stocks under $50, Financhill has got you covered and has so much more.
  • Stocks Set To Soar & Crash
    Financhill spots seasonal patterns in thousands of stocks so you can easily screen for the best stocks at this time of year. Want to know what stocks could rise 11% over the next 7 weeks with 91% accuracy based on past history? Our Seasonality Screener will surface the hottest stocks right now.
Learn More

Featured in:

CNBC
The Wall Street Journal
Chicago Tribune
Barrons
MSN
Reuters