This is an ongoing series of Water Stocks that is published yearly during the month of December. 2020 will be remembered for many significant events and the stock market crash also known as the Coronavirus crash will be one of them. The crash began on February 20th, 2020 and ended on April 7, 2020. The Dow Jones Industrial Average dropped from 29,406 to 18,591, (a 37% drop) in a matter of weeks but now is up about 4% YTD. The Nasdaq dropped 40% during the crash and is in position to finish the year up 100% from the low and up over 40% YTD.
The best performers in the water stocks portfolio were the ETFs, most up in double digits. The best performing stock was up 23% and one had a decline of 10%. Just like the year, the stocks were all over the board. Take a look below to see the details. This series of articles dates back to 2012 intending to increase awareness of water scarcity, potentially raise 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 water stocks and ETFs for ten years now.
American Water Works Co. Inc. (NYSE: AWK)
AWK is up 23% YTD. It climbed 35% in 2019 after an increase of 4% the year before. This stock continues to be a solid performer. During the Coronavirus crash it dropped from 135 to 100. During the last 10 years this stock has traveled from the mid 20’s to 148. I’m not sure where we could have found such good gains in the past ten years in such a conservative industry. American Water Works water stock provides water and wastewater services to 15 million people in 30 U.S. states and parts of Canada.
Aqua America Inc. (NYSE: WTRG)
Aqua American is flat this year and up 56% in the last three years. 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 stock has returned around 72% for the past six years outperforming the Dow Jones Industrial Average, which saw gains of about 52% during this same time. During January of 2020, Aqua America changed its name to Essential Utilities.
California Water Service Group (NYSE: CWT)
This water company is a utility serving California, Washington, New Mexico, and Hawaii, and American States Water Co. Year to date 2020 California Water Service Group is flat. For the last six years, the water stock is up 112%. A vast majority of their revenue comes from states hit hard with drought. This water stock experienced a 40% drop in value during the Coronavirus crash.
American States Water Company (NYSE: AWR)
This California-based utility provides water, electric, and contracted services in the United States. In 2019 it saw gains of 29%. YTD 2020 it is down about 10% and during the past five years, this stock is up 84% and been a solid performer over the last eight years and is diversified across the United States. It has been the best performing water stock in the portfolio.
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.
In 2020 the performance of ETFs for water was much better than the stocks in the portfolio. Below is the past performance of a few of the popular water ETFs we have been following:
Power Shares 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 is up 4%. It is also up 65% for the last five years.
Power Shares Water Resources Portfolio (PHO)
The largest Water ETF with more than $1 billion in assets. It also invests in companies providing potable water. In 2019 it was up 34%, this year another 18% and increased by 110% the last five years.
Guggenheim S&P Global Water Index ETF (CGW)
This ETF corresponds to the S&P Global Water Index. This ETF is the first U.S. listed global Water ETF. It was up 30% in 2019, up 11% in 2020 and up 69% in the last five years.
First Trust ISE Water Index Fund (FIW)
First Trust focuses on companies with wastewater and potable water direction. It was up 33% last year and up 11% this YTD and up 135% the past five years.
As you can see, 2020 was a wild year for the stock market, and several of the water stocks did exceptionally well.
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 2021? If you enjoyed this article, please consider subscribing or following me on twitter @H2oTrends
I have invested in the water ETFs and several of these stocks before with some success and I’ve been an investor for 30 years. Thanks for pointing these companies out to me for a second look and go round!
I really enjoy researching investments pertaining to our industry. I believe as a person working in the industry it would behoove me to keep tabs on what’s going on and it would increase my knowledge base of the industry of which I am associated. I appreciate your insight. I’d like to dig further into advances and new technology with water and the water resources support chain. I have noticed that many recent advances in irrigation are rooted in the semiconductor industry. It’s difficult though to ascertain which semiconductor company is doing the work and what percentage of their business is geared toward irrigation technology.
We can’t live without water!
Thanks, John for the great comments. I’m sure you noticed the Chicago Merc open up trading on water futures this week. The Nasdaq Veles California Water Index (ticker symbol: NQH2O) tracks the price of water rights leases and sales transactions across the five largest and most actively traded regions in California. The CME trades a futures contract on it now. I hope we see some good volume for the contract and growers use it as a hedge. Time will tell.
Hey Bart, I haven’t spent much time thinking about the semiconductor business and water. I know they use a lot of water and some of their products are used for technology. Thanks for the heads up, I am going to spend some time researching this to see what I can learn.