The water sector in the USA is a sprawling landscape, encompassing everything from public utilities to private engineering firms, all working to ensure that communities have access to clean water and effective wastewater treatment. Public utilities are the backbone of this industry, providing essential services to millions of homes and businesses. These organizations manage the entire water cycle, from sourcing and treating water to distributing it and treating wastewater to meet environmental standards. Beyond public utilities, private companies specialize in water infrastructure engineering, consulting, and construction, often collaborating with government agencies to modernize aging water systems and implement sustainable solutions. These companies are at the forefront of developing cutting-edge technologies for water purification, desalination, and leak detection, which are crucial for improving the efficiency and reliability of water systems.
Several trends are currently shaping the water business in the USA and globally. One of the most significant is the increasing focus on sustainable water management practices due to growing concerns about water scarcity and climate change. Innovations like smart water grids and modern metering infrastructure are being implemented to make water use more efficient and reduce losses. The emergence of digital technologies such as IoT and AI is disrupting the status quo, providing new ways for water utilities to monitor and manage their operations. Real-time data collection and analysis, followed by predictive maintenance, not only make water consumption more sustainable but also offer significant opportunities for profitability by cutting operational costs.
Another significant trend is the rising investment in water infrastructure, fueled by government initiatives and public-private partnerships aimed at upgrading aging water systems and expanding access to clean water. From an investment perspective, the future of the water business in the USA looks bright, with several factors contributing to its potential growth. The increasing demand for clean and safe water, driven by population growth and urbanization, presents substantial opportunities for water treatment companies and distributors. Additionally, the increasing awareness and focus on the environmental and sustainability aspects of operations, primarily caused by regulatory requirements, are likely to fuel demand for innovative water management solutions and sustainable practices.
Investors are particularly interested in the water solutions sector due to its incredible resiliency during recessionary periods. Many water-related projects are sponsored by public budgets, meaning that companies exposed to water operations usually have a low equity beta, making them likely to outperform the broad market during bearish periods. This feature is particularly attractive during stock market peaks, as the US equity market is currently near its all-time highs, while the actions of the new Trump 2.0 regime are starting to cause cracks in the outlook of businesses and consumers. With many surveys and intelligence agencies reporting a sentiment change towards more pessimistic scenarios, as well as significant cuts in the outlook for capital spending by private entities, water-related businesses may become more favored in the eyes of the “smart money”.
In this context, we turn our attention to Pentair plc (NYSE:PNR), a global leader in water treatment and sustainable solutions. Specializing in filtration, purification, and fluid management technologies, Pentair serves residential, commercial, industrial, and agricultural markets worldwide. The company’s portfolio includes water filtration systems, pool equipment, pumps, and smart water management solutions, helping customers optimize water quality and efficiency. Pentair’s focus on innovation and sustainability drives its efforts to address global water challenges, from providing clean drinking water to enhancing water conservation. With a strong presence in both consumer and industrial segments, Pentair continues to expand its impact in the water sector through advanced technology and strategic growth initiatives.
Pentair plc (NYSE:PNR) is returning to growth after experiencing relatively flat top-line performance in recent years. The company operates across three segments focused on moving, improving, and enjoying water, positioning itself as one of the largest pure-play water companies. For 2025, the Pool segment is guided to grow 4-5% YoY, with growth coming from a small acquisition and a mix of price and volume improvements. The company maintains strong profitability, with the Pool business achieving a 33% return on sales. Pentair has demonstrated pricing power with approximately 75% of revenue flowing through distribution, expecting price to contribute 1.5% to 2% growth in 2025 and offset inflation. The company is well-positioned to handle upcoming tariffs through inventory management, pre-buys, and pricing power.
Looking ahead, Pentair plc (NYSE:PNR) sees a sustainable runway for margin expansion over the next 3-5 years through transformation initiatives in sourcing, operational footprint, and organizational excellence. The company maintains financial strength as an investment-grade company and dividend aristocrat, having raised dividends for 49 consecutive years, with the most recent increase being 9%. Overall, PNR ranks 4th on our list of best water stocks to buy according to hedge funds. While we acknowledge the potential of PNR as an investment, our conviction lies in the belief that AI stocks hold greater
