Top Ways To Invest In Water

Regions of the U.S. are undergoing a record drought that has created stress for various industries, restrictions on personal water use, a new hashtag, and the threat of massive fines. 

Is the crisis also creating investment opportunities?

"As the water crisis moves from something that happens to other countries into the U.S., it’s a decent bet that American corporations will somehow, someway figure out ways to solve the problem at a profit. That’s how capitalism works, after all. The question is when," a Yahoo Finance writer wrote.

If the drought is going to make people rich, it remains unclear exactly how that will happen. But various analysts have ideas.

"If US water costs are to continue to rise, is there an investable opportunity associated with the theme? The answer is yes, but not in the same way as other commodities. Being essential for life, water is not a traditional investment asset," said Erico Matias Tavares, an expert on natural resource sector investments, and Jeremy Hill, a finance professional, recently in Forbes.

Some voices point to utilities as a good water-related investment.

"You might not get such a big bang for your buck, but [they’ve been] a good, steady investment for a number of years,” Kent Croft, portfolio manager at Croft Investment Management, told Wealth Management. 

Others are less enthusiastic about this investment, noting the challenges water utilities face on many fronts. 

"Shawn Hackett, president, Hackett Financial Advisors, is wary. Water conservation is on many people’s minds, the California drought notwithstanding, and lower water use may hurt utilities’ revenues. With less money coming in, it may make it more difficult to invest in infrastructure, he added," according to Wealth Management. 

Is investing in water infrastructure a better way to go?

"The aging U.S. water infrastructure is another issue of investor interest, as municipalities need to replace broken mains and do other improvements to maintain water supplies to citizens. Croft said Xylem is a leading provider of water infrastructure and is one of the purest plays out there," the report said. Croft noted, “They are trading at a little premium to the market, but not anything crazy." 

What's the most "contrarian way" to get into the water market? Invest in fracking. 

The Forbes columnists wrote: "Perhaps the most interesting and contrarian way to get exposure to the changing water dynamics across the U.S. over the medium term is by investing in oil and gas exploration and production companies."

"After the remarkable growth of [fracking], the U.S. oil and gas sector looks particularly exposed to changes in water rates and regulations. Fracking requires millions of gallons of water per well and recycling is not yet widely adopted. As a result, water scarcity is likely to become another key differentiating factor among shale plays," they continued.

For more oil and gas news, check out Water Online's Produced Water Solution Center. 

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