Stocks and Water One Year Later

As I write this post I wonder, will December bring us a Santa Claus rally in the stock market or will we drive off a fiscal cliff?   Well the good news is we are going to know in less than a month.  Almost a year ago I wrote our supply of water is limited, but as long as we demand to water our lawns at noon or have lawns in sweltering climates, increased demand should amount to an increase in prices.     The only question that remains is, who will get rich from the most precious commodity of the new millennium?  Stocks with an interest in water could be the answer.

Invest in Water Company Stocks

So far year to date the Dow Jones Industrial Average is up 6.6%.  Let’s take a look at how some of the companies I identified last January performed this  year.

American Water Works Co. Inc. (NYSE: AWK):  This stock is up 19.81 % this year and paid a 3% dividend.  Its closing price last Friday was 38.  This gain was after a previous years gain of 25%.  I’m not sure where else we could have found a 44% gain in the past two years. American Water Works provides water and waste water services to 15 million people in 30 U.S. states and parts of Canada.

Aqua America Inc. (NYSE: WTR):  Gained 15.83% so far this year.  It closed last Friday at 25.46. Aqua America is a holding company for a group of regulated utilities serving 3 million customers in 13 states ranging from Texas to Maine.

California Water Service Group (NYSE: CWT): This water company is a utility that serves California, Washington, New Mexico, and Hawaii, and American States Water Co.  It was the one under performer in the group.  It is down 1.2% year to date, closing at 18.01 last Friday.  California Water missed an earning report back in November which caused the Motley Fool to report maybe their dividend is doomed.  Most interesting in this article is the Fool reports water prices are up in California, but people are barely using more.  Way to go California!

American States Water Company (NYSE: AWR): This California-based utility provides water, electric, and contracted services in the United States.  This year it is the big winner up 30%.  It closed at 45.81 last Friday and in Q3 they increase earning per share 17% while decreasing both operating and interest expenses.  A perfect positive storm.

Invest in Water Exchange Traded Funds 

Another option is to invest in water Exchange Traded Funds (ETF).  Think of an exchange traded fund as a mutual fund that trades on a public exchange, like the New York Stock Exchange.  You get the diversification of a fund with the added benefit of the liquidity of a public exchange.  Following are a few of the popular water ETFs today.

PowerShares Global Water Portfolio (PIO): This ETF is based on the Palisades Global Water Index. It focuses on companies providing potable water.  The year the ETF was up 11% closing at 17.37 last week.

PowerShares Water Resources Portfolio (PHO): The largest Water ETF with more than $1 billion in assets. It also invests in companies providing potable water.  Year to date it is up 20%, closing at 20.26.

Guggenheim S&P Global Water Index ETF (CGW): This ETF corresponds to the S&P Global Water Index. This ETF is the first US listed global Water ETF. It is up 16.92% closing at 21.91.

First Trust ISE Water Index Fund (FIW): Focuses on companies with waste water and potable water direction.  It is up 20.25% year to date closing at 25.08.

As you can see 2012 was a big year for water stocks.  Please do not take any of the information on this post as a recommendation to buy the stocks or ETFs.  This is simply an attempt to start a meaningful conversation on the blog about investing in water. What do you think is in store for the stock  market and water stocks in 2013?

Learn More About Richard Restuccia

If you like this post please consider subscribing to the blog or follow me on twitter at @H2oTrends.