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Water ETFs to Invest in 2016 – Best ETFs for Full Exposure to Water


Apr.28.2016

Water ETFs to Invest in 2016 - Top Picks

With the droughts on the West Coast, and lead crisis expanding from Flint to the rest of the East Coast, investing in water companies sounds like a no brainer. To further back the opportunity, the genius from the movie "The Big Short" also has explained why water is the commodity to buy. Especially if you have passed your Financial Assessment test and are eligible to expand your investing portfolio. With that I finally sat down and wrote about the best water ETFs to invest in 2016, which we have been advising to some Invest Diva students. You don't have to search no more!

Just as we do for forex and stocks, for our ETF picks I would also get help from the Invest Diva Diamond Analysis.

Water ETFs to Invest in 2016 - The Lazy Crab Water ETFs to Invest in 2016 - The Lazy Crab

 

1-Water ETFs to Invest in 2016 - Fundamentals

Do you take water for granted? According to experts including Michael Lewis, you shouldn't.

Why invest in water?

Water is the foundation of life as we know it. However fresh, clean water can not be taken for granted anymore. While the amount of freshwater on the planet has remained fairly constant over time—continually recycled through the atmosphere and back into our cups—the population has exploded. This means that every year competition for a clean supply of water for drinking, cooking, bathing, and sustaining life gets more intense.

While nearly 70 percent of the world is covered by water, only 2.5 percent of it is fresh. The rest is saline and ocean-based. Even then, just 1 percent of our freshwater is easily accessible, with much of it trapped in glaciers and snowfields. In essence, only 0.007 percent of the planet's water is available to fuel and feed its 6.8 billion people.

To sum it up, we are down to the basics of investing: Shortage of supply and increase of demand.

 

Why water ETF?

Exchange Traded Funds (ETFs) are some of the most cost-effective investing tools that give you exposure to a variety of assets within a category. And as I've explained here, investing in an ETF could be a better choice than a mutual fund to a home-based investor. So if you want to get in the water business without many resources, ETF is the way to go.

2-Water ETFs to Invest in 2016 - Technical Analysis

There is a huge difference in technical analysis when it comes to ETFs-- Mostly because there is not much historical data available for them. ETFs are one of the newest forms of investing after all.

 

With that, here are the steps you can take in order to select the ETF that is right for you:

1- Start with a water company that you know of and like: If you are a frequent shopper of a specific water brand on the consumer side, or you use an industrial water utility you can start by looking into water ETFs which hold those shares within their basket

2- Select the ETF(s) which has exposure to both industrial and utility water companies: ETFs are all about diversification. So if you are going through the trouble of finding an ETF, it's best to select the  one that covers all sectors

 

In a jam and not sure what to pick? We can help!

 

3- Do a quick research on other holdings of that ETF: You want to make sure that your ETF is a basket of juicy fruits. Or the gathering of ultra-sexy people. However you'd like to interpret the ETF metaphor!

4- Conduct technical analysis on the chart to see where the prices stand: While it is not necessary to use traditional technical indicators and chart patterns when it comes to ETFs, it is always good to checkout the chart and figure out the habits of it. Is this a cycling ETF? Has it been moving up since its formation? Is this a good time to buy or should you wait for it to go lower?

Voila! You've got yourself an ETF!

3-Water ETFs to Invest in 2016 - Invest Diva's Picks

After conducting the steps above, I selected the following Water ETFs to invest in 2016 for my own portfolio:

 

1- Guggenheim S&P Global Water ETF (CGW)

Focuses on 50 global companies that specialize in water-related business activities. The vast majority of the CGW is weighted in industrial stocks such as Pentair plc (NYSE:PNR) and utilities such as American Water Works Company Inc (NYSE:AWK).

CGW's Top Fund holdings:

Company Symbol % Assets
GEBERIT AG JONA GBERF 8.08
American Water Works Company, I AWK 7.22
Pentair plc. Ordinary Share PNR 5.57
United Utilities Group PLC UUGWF.L 5.26
Danaher Corporation Common Stoc DHR 5.19
Veolia Environnement SA VEOEF.PA 5.06
Severn Trent PLC SVTRF.L 4.33
Xylem Inc. Common Stock New XYL 4.23
Suez Environnement Co SA SZEVF.PA 3.81
IDEX Corporation Common Stock IEX 3.65

 

  • Net Assets: $376.38 million
  • Expense Ratio: 0.65%
  • Dividend Yield: 1.70%
  • 1-Year Performance: -2.96%
  • 5-Year Performance: 12.52%

 

2- PowerShares Water Resources ETF (PHO)

This is the largest of the water ETFs with nearly $860 million in assets. The ETF is designed to follow an index that primarily tracks companies that make products centered around water conservation and purification. Top holdings include companies such as Roper Industries, Inc. (NYSE:ROP), Flowserve Corp (NYSE:FLS) and Pall Corporation (NYSE:PLL). Expenses are 0.61%, or just $61 annually for every $10,000 invested.

PHO's Top Fund Holdings:

Company Symbol % Assets
Pentair plc. Ordinary Share PNR 8.42
Waters Corporation Common Stock WAT 8.12
Roper Technologies, Inc. Common ROP 8.06
Ecolab Inc. Common Stock ECL 8.06
American Water Works Company, I AWK 7.88
HD Supply Holdings, Inc. HDS 4.41
Pattern Energy Group Inc. PEGI 4.16
Valmont Industries, Inc. Common VMI 4.06
Xylem Inc. Common Stock New XYL 4.05
Toro Company (The) Common Stock TTC 4.00

 

  • Net Assets: $864.48 million
  • Average Daily Trading Volume (past three months): 84,561
  • Expense Ratio: 0.61%
  • Dividend Yield: 0.60%
  • 1-Year Performance: -5.13%
  • 5-Year Performance: 9.59%

Other noteworthy Water ETFs to invest in 2016 include PowerShares Global Water ETF (PIO) and First Trust ISE Water ETF (FIW). I wouldn't add more than two water ETFs to my portfolio, because you don't want your portfolio to be too water heavy or "watery" :)

 

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