Dive Into These Water ETFs For Big Gains

Every year, Mar 22 is observed as World Water Day, advocating the sustainable development of water. This is because water plays a major role in the evolution of economy and human life, and consequently needs to be conserved.

Climate change, pollution, poor sanitation, an ever-expanding population, and increasing consumption have resulted in water scarcity in many parts of the world. Wastewater runoff from agriculture, industry, and expanding cities, especially in developing nations, is another major issue. In fact, the International Food Policy Research Institute anticipates a gap of 40% between water demand and supply over the next 15 years.

Global demand for water has been rising at a rate of 1% annually, and would continue to grow significantly during the next 20 years, per United Nations. Notably, about 70% of the total demand comes from irrigation while demand from industrial applications and domestic households account for about 22% and 8%, respectively (see: all the Industrial ETFs here).

Given the scarcity of water, both emerging markets and developed markets have increased their spending on water and wastewater treatment equipment. According to the Global Water Intelligence, operating and capital expenditures by utilities and industrial water users on water and wastewater, is expected to grow from $770 billion in 2018 to $914.9 billion by 2023.

In particular, President Trump in October signed a sweeping law, which authorizes the US Army Corps of Engineers to administer water resource projects and policies nationwide. The America's Water Infrastructure Act of 2018 will authorize federal funding for water infrastructure projects, expand water storage capabilities, upgrade wastewater, drinking and irrigation systems, as well as authorize or reauthorize water infrastructure projects and programs. Meanwhile, China has increased its spending this year to clean up water by 45.3% in order to fight against pollution.

Given this, water ETFs are excellent investment options as utility operators are putting money to meet growing global demand for fresh water. We have highlighted some ETFs and stocks that could be excellent picks to tap this growing opportunity.

Invesco Water Resources ETF (TO:PHO)

This fund provides exposure to U.S. water utility stocks that create products to conserve and purify water for homes, businesses and industries. It tracks the Nasdaq OMX US Water index and holds 35 securities in the basket with none accounting for more than 8.2% of the assets. The fund has amassed $950.3 million in AUM and charges 62 bps a year in fees (read: Wall Street's Best Start Since 1987: Top ETFs of Top Sectors).

Invesco S&P Global (NYSE:SPGI) Water Index ETF CGW

This ETF provides global exposure by tracking the S&P Global Water Index. It holds 50 stocks in its basket with each holding no more than 10.4% share. The fund has managed assets of $605.4 million and charges 62 bps in annual fees. In terms of country exposure, American stocks make up for half of the assets followed by United Kingdom with 14% share.

First Trust Water ETF FIW

This ETF follows the ISE Clean Edge Water Index, which is a modified market capitalization-weighted index comprised of exchange-listed companies that derive a substantial portion of their revenues from the potable and wastewater industry. Holding 37 stocks, it is pretty well spread out across components with each holding not more than 5% of assets. The fund has amassed $342.3 million in its asset base while charging investors 56 bps in annual fees.

Tortoise Global Water ESG Fund TBLU

This fund tracks the Tortoise Global Water ESG Net Total Return Index, which comprises companies that the manager believes are positioned to benefit from the pursuit of solving the water supply/demand imbalance. It holds 40 stocks in its basket with each making up for less than 7.7% share. The ETF has accumulated $4.4 million in its asset base while charges 40 bps in annual fees (read: ETF to Depict Freedom Of an Emerging Economy in the Making).

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>


Invesco S&P Global Water Index ETF (CGW): ETF Research Reports

Invesco Water Resources ETF (PHO): ETF Research Reports

First Trust Water ETF (FIW): ETF Research Reports

Tortoise Global Water ESG Fund (TBLU): ETF Research Reports

Original post

Zacks Investment Research