This year was the best year for water stocks since we have been tracking them. This series of articles dates back to 2012 with the intention of increasing awareness of water scarcity, potentially increase capital for water infrastructure and provide an opportunity to do more than just complain about rising water prices. We have been following a portfolio of stocks and ETFs for 7 years now and 2017 has been another good year for these water stocks.
Year to date the Dow Jones Industrial Average is up 25% for the year. The Nasdaq is up almost 30% and the Standard and Poor’s 500 is up 20%. All amazing gains for a year. These same indexes were up nicely last year but nothing like the gains we saw this year, flat last year. Let’s take a look at how the companies (associated with water) identified in January 2012 performed.
American Water Works Co. Inc. (NYSE: AWK): This stock was up 25% in 2017 and 21% in 2016. This stock is up about 50% during the last 3 years. I’m not sure where else we could have found such good gains in the past three years in such a conservative industry. American Water Works provides water and wastewater services to 15 million people in 30 U.S. states and parts of Canada.
Aqua America Inc. (NYSE: WTR): Gained 25% this year after gaining 1% last year. Aqua America is a holding company for a group of regulated utilities serving 3 million customers in 13 states ranging from Texas to Maine. This is almost a 37% return for the past three years.
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. This stock is an example of there is no such thing as a sure thing. It has been an underperformer in the group in 2015 down 8.5%. In 2015 California Water Service Group learned first hand what the drought in California means for revenue. A large majority of their revenue comes from states hit hard with drought while their operating expenses rose slightly, with higher labor costs, drought program, and conservation expenses. In 2016 it made up for poor past performance turning in the biggest gain, up 48%. In 2017 it was up 26%. Over the last 3 years, it has gained 66%.
Exchange Traded Funds or ETFs
Another option to invest in water is 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.
Below is the past performance of a few of the popular water ETFs we have been following:
PowerShares Global Water Portfolio (PIO): This ETF is based on the Palisades Global Water Index. It focuses on companies providing potable water. This year the ETF was up 24% after finishing down 1% and down 8% the past two years.
PowerShares Water Resources Portfolio (PHO): The largest Water ETF with more than $1 billion in assets. It also invests in companies providing potable water. In 2017 it was up 22% and for the past three years up 20%
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 was up about 25% in 2017 and up 27% over the past three years.
First Trust ISE Water Index Fund (FIW): Focuses on companies with wastewater and potable water direction. It is up 22% this year and 44% over the last three years.
As you can see 2017 was a good year for the stock market and for these stocks with a focus on water. Looking at the last three-year performance – the Dow was up 36%. All of the stocks outperformed the Dow, most of the ETFs underperformed the Dow.
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 2018? If you enjoyed this article please consider subscribing or following me on twitter @H2oTrends.