investing

5 water investments to consider

Water pipe and system makers. Many water pipes were laid 100 years ago, and about one-third of piped water leaks out, Berlant says. The U.S. will need to spend at least $500 billion over the next 20 years to replace this aging infrastructure, according to the EPA. Municipalities and for-profit utilities will bear the brunt of these costs. At the same time, some emerging countries are laying new systems to deliver clean water.

Infrastructure companies include pipe makers such as the Northwest Pipe Co. in Vancouver, Wash., and Mueller Water Products in Atlanta, which also makes hydrants and valves. Gorman-Rupp Co., a pump maker in Mansfield, Ohio, is another player in water investments.

Also, some exchange-traded funds track water indexes, such as the Palisades Water Indexes and the International Securities Exchange Water Index, which include some infrastructure and water treatment stocks.

'Smart' water meters. The manufacture and sale of smart water meters that monitor and manage water usage is a fast-growing business. Eventually, there will be more meter use when more U.S. consumers are billed for water based on a meter reading just as they are for electricity consumption, Berlant says.

Meter maker leaders Badger Meter Inc. in Milwaukee and Itron Inc. in Liberty Lake, Wash., manufacture products that help measure and control water flow. WaterTech Capital's Hoffmann estimates that this niche will grow 14 percent to 16 percent annually for the next several years.

Agriculture irrigation systems. About 70 percent of all fresh water is channeled into agriculture for growing corn, wheat and other crops. So, the efficient delivery of water is very important, as water availability shrinks, Berlant says. "And the newer equipment is far more water-efficient."

Two leading irrigation players are Valmont Industries Inc. and Lindsay Corp., both of Omaha, Neb. Hoffmann forecasts that agriculture irrigation revenues will grow by almost 20 percent annually over the next 10 years.

Water rights. Companies with water rights also will prosper as water rates rise, Berlant says. So, listed farming companies such as J.G. Boswell Co. of Pasadena, Calif., and Limoneira Co. of Santa Paula, Calif., which own extensive farmland tracts with water rights, could see their values rise. For example, J.G. Boswell, the country's largest cotton producer, owns 150,000 acres in California, along with lots of water rights.

Hoffmann says that for investors with deep pockets, private equity funds might make sense as they plow more money into water rights.

By 2016, private sector water investments eventually will account for 30 percent of investments in drinking water and wastewater compared to 19 percent now, according to the independent Global Water Fund consultancy.

For example, NGP Global Adaptation Partners, a private equity firm in Irving, Texas, whose parent firm, Natural Gas Partners, has $10.8 billion under management, has started investing in water. "We invest in water rights in the western U.S.," says Jud Hill, an operating partner at NGP. "We buy farms and farmland, which have senior water rights."

Hill says it's a great time to invest in water as people rethink how they use water and how much they need. "We have a fixed amount of water and growing demand," he says.

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