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Tickers in this Article: JPM, FLS, AWK, VE, WTR, CWT
Usually when the talk shifts to resources where demand outstrips supply, the focus is oil or precious metals. However, there is another resource that is finding its way into these discussions now, too - 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, the increasing population and pollution has made water a very fragile and important resource.

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. It's also important to realize that companies that treat waste water are 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 or who make products or provide services that help bring clean water to market:

Company
Market Capitalization
American Water Works
(NYSE:AWK)
$3.6 billion
Aqua America
(NYSE:WTR)
$2.2 billion
Veolia Environment SA
(NYSE:VE)
$26.1 billion
Flowserve
(NYSE:FLS)
$7.8 billion
California Water Service
(NYSE:CWT)
$759 million

Top Picks


  • Veolia Environment: According to the company's website, Veolia provides wastewater and drinking water services to 132 million people. It also employs more than 80,000 people and has operations in some 60 countries. According to Zacks estimates, the French company is expected to earn $3.37 a share and $3.72 in 2009. Also, in the next five years it's expected to grow at a 12.3% pace. The stock pays a dividend, and its current yield is 5.1%.

  • American Water Works: The company provides water and wastewater services and operates in 32 states and Canada. The New Jersey-based company is expected to earn $1.22 a share this year and $1.43 a share in 2009. In the next five years analysts are forecasting that the company will grow 10% per annum. Expected 2008 revenue is $2.4 billion. JPMorgan Chase (NYSE:JPM) gave the company a 'neutral' rating. I think this coverage may draw some retail and institutional interest to the stock. (For more on these predictions, read Analyst Recommendations: Do Sell Ratings Exist?)
Bottom Line
Due to the growing world population and the demand for water I suspect that companies that are able to help deliver, process, and/or transport water will be in large demand.

For related reading, see Water: The Ultimate Commodity.

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