The Search for Blue Gold

World water crises is not simply coming, it is already here, and climate change is not helping. Over the years, the world water crises has been consistent, but society has chosen to acknowledge and deal with it differently as per the urgency of the situation. Initially, water management was preached, followed by which education and awareness on new conservation technologies was addressed. However, in today’s day and time, the world experiencing orange skies and burning forests has started to value the liquid state of water more than ever. Clean water campaigns and fundraisers are initiatives taken to ensure availability of clean water throughout the globe. Moreover, water businesses have been on an upsurge ever since population started rising out of hand and clean water became scarce. Investors are making bigger bets on firms that are related to manufacturing, recycling, and preservation of water. The top three investments to make in this line of work are:

Xylem Inc (XYL): The firm is a leading global provider of innovative and sustainable water technologies improving the ways in which water is re-used and preserved. Xylem reported its annual earnings and the EPS of $1.40 was a whopping 15% higher than expectations. Based on previous growth rates, the annual EPS forecast for 2021 is $2.44, an almost 75% increase on a YOY basis. As water continues to grow scarce, the firm’s outlook appears optimistic.

California Water Service Group (CWT): California Water Service Group is the third largest publicly trading water utility company in the United States, providing wastewater services to more than two million people. The firm recently announced its plan to buy Skylonda Mutual Water Company’s water system assets by 2022. CWT has been experiencing buying pressure, which is a positive indicator for future bullish motion.

Middlesex Water Company (MSEX): MSEX operates regulated water utility and wastewater systems. The firm's services include water treatment, & distribution, wastewater collection and treatment. The firm has an ROE of 11%, considerably favorable that the industry average of 7.7%. MSEX is reinvesting heavily into its business by retaining 52% of its profits. Unsurprisingly, this has concluded to an impressive earnings growth. The company’s financials depict that the stock could potentially see an increase in value in the long-term.

Ever since the blue gold started trading in the financial market, investors are enlightened that oil is not the only valuable liquid there is. Water future contracts started trading at Chicago Mercantile Exchange as a commodity, like gold and oil, in December 2020. There are currently 5 water exchange traded funds in the US, namely: Invesco Water Resources ETF, Invesco S&P Global Water Index ETF, First Trust ISE Water Index Fund, Invesco Global Water ETF and Ecofin Global Water ESG Fund. Banks and investment funds have started conquering the water market. Clearly, money does not grow on trees, but investors are betting for it to grow in fresh water.