Water, the lifeblood of our planet, is paradoxically abundant yet scarce. While it blankets over 70% of the Earth’s surface, only a minuscule fraction is fresh and drinkable. This reality underpins a pressing truth: as the global population swells and climate change exacerbates drought conditions, the demand for clean water will only intensify. Jon Wolfenbarger, CEO of BullAndBearProfits.com, captures this sentiment succinctly: “I am bullish on the water industry long term, due to the need for clean water as a result of increasing global population and industrialization, as well as climate change problems and regulations.”
The urgency for clean water is compounded by aging infrastructure that struggles to meet rising demand. With the looming threat of PFAS, or “forever chemicals,” in our water systems, the need for substantial investment in infrastructure repair and replacement becomes ever more critical. Peter J. Klein, chief investment officer at Aline Wealth, highlights the significance of last year’s first national drinking water standard to limit these harmful chemicals. The financial implications are profound; as Klein notes, the spending required for infrastructure upgrades presents “a strong tailwind to many companies in the remediation, infrastructure and testing industries.”
For investors eyeing this burgeoning sector, a slew of stocks and funds emerges as potential avenues for capitalizing on water’s critical role. American Water Works Co. Inc. (AWK) stands out as a cornerstone investment. As the largest publicly traded water and wastewater utility in the U.S., it serves a diverse client base, including residential, commercial, and military contracts. Chris Ottinger, an investment analyst at Tortoise Capital, emphasizes the defensive nature of water utilities, noting their resilience during economic downturns.
Essential Utilities Inc. (WTRG) offers a unique proposition by combining water and wastewater services with natural gas operations. This diversification may appeal to investors looking for stability amidst the volatility of the water sector. Wolfenbarger praises its robust infrastructure spending and consistent dividend growth, making it a tempting option for those seeking reliable returns.
Investors looking to tap into the technological side of water management should consider Badger Meter Inc. (BMI) and Xylem Inc. (XYL). Both companies are at the forefront of smart metering and water technology, addressing the pressing need for efficiency and leak detection in utility operations. As Ottinger points out, these firms are well-positioned to benefit from the increasing investments by utilities in advanced technologies.
For those preferring a diversified approach, ETFs like Invesco Water Resources ETF (PHO) and First Trust Water ETF (FIW) offer exposure to companies engaged in water conservation, purification, and infrastructure. With significant assets under management and solid performance metrics, these funds provide a compelling option for investors seeking to spread their risk while still capitalizing on the water theme.
As the world grapples with the implications of climate change and population growth, the water industry stands poised for significant transformation. The convergence of technological innovation, regulatory pressures, and the urgent need for sustainable practices creates a fertile ground for investment. The question is not whether water will remain a critical resource; it’s how stakeholders in the water sector will adapt and thrive in the face of unprecedented challenges. The future of water is not just a matter of supply and demand; it is a complex interplay of technology, infrastructure, and environmental stewardship that will shape our planet for generations to come.
