Usually when the talk shifts to resources where demand outstrips supply, the focus is oil or precious metals, but there is another resource that is finding its way into these discussions - clean water.
Two-thirds of the Earth's surface is covered by water, but only a fraction of that is potable. While desalinization efforts may help satisfy some of the demand, increasing population and pollution has made water a fragile and important resource. (Discover ways to invest in this scarce resource, check out Water: The Ultimate Commodity.)
Another factor to consider is the high cost to tap sub-surface water supplies, and to create the infrastructure necessary to transport it to remote areas. Unfortunately, this makes accessing and distributing water quite difficult for struggling economies. Companies that treat waste water are also important because they play a major role in keeping our environment clean and preventing transmittable diseases. Investors may get in on the demand for clean water by investing in this resource.
Water Stocks to Know
The following is a list of larger, better known public companies that provide water services or wastewater treatment:
|
Company
|
Market Capitalization
|
|
American Water Works
(NYSE:AWK)
|
$3.5B
|
|
American States Water
(NYSE:AWR)
|
$696M
|
|
Aqua America
(NYSE:WTR)
|
$2.4B
|
|
California Water Service
(NYSE:CWT)
|
$833M
|
|
Connecticut Water Service
(Nasdaq:CTWS)
|
$218M
|
| Data as of market close August 19, 2008 |
American Water Works Company
Founded in 1886 and based in New Jersey, American Water Works is, according to its website, "the largest, investor-owned water and wastewater utility company in the United States."
The company is coming off a not so swift second quarter. In fact, in the period ended June 30 it earned $45.5 million with an
earnings per share (EPS) of 28 cents. That's down a smidge from the $49.2 million (31 cents a share) it turned in during the same period last year. The street had reportedly been looking for 35 cents a share but it was 7 cents shy of that.
According to the company's earnings release, "the change in
net income was driven primarily by higher operating and maintenance expenses." According to Yahoo Finance, the company is expected to earn $1.19 a share this year and $1.40 a share in 2009. It perks my interest because the stock currently trades under $22, there's a small
dividend, and the current
yield is 3.8%. However the downside is I don't see any huge catalysts on the near-term horizon.
Bottom Line
The growing world population means that companies that process, deliver and/or transport water will always be in high demand. The stocks covered here are definitely worthy of follow up research for investors looking to capitalize on the attractive long-term fundamentals that exist with water. For further readings, check out
Taking Global Macro Trends To The Bank.
