Did you miss the run up in Twitter stock this year? I know I did. Twitter share price rose 42% from the time it was offered for trading on November 7th to the end of the year. Twitter offers a great service, with revenue over $300 million, but has yet to turn a profit. Time will tell if the run up is justified or not. For those of us a little more conservative and conservation minded, let’s take a look at how our water stocks fared against other popular stock indexes.
Invest in Water Company Stocks
In 2013 the investors couldn’t buy enough stock and kept bidding prices higher. The Dow Jones Industrial Average rose 26% for the year. The S&P 500 Index rose 29% and the Nasdaq rose 38%. Only four times since the start of the S&P 500 Index has there been bigger gains. The biggest gain was in 1958 when the index rose 38%. Let’s take a look at how some of the companies (associated with water) I identified in January 2012 performed.
- American Water Works Co. Inc. (NYSE: AWK): This stock was up 14% in 2013. Its closing price at the end of the year was 42.26. This gain was after a previous year’s gain of 20 % and a 25% increase in 2011. I’m not sure where else we could have found such good gains in the past three years in such a conservative industry. American Water Works provides water and waste water services to 15 million people in 30 U.S. states and parts of Canada.
- Aqua America Inc. (NYSE: WTR): Also Gained 11% this year. It closed at 23.59. Aqua America is a holding company for a group of regulated utilities serving 3 million customers in 13 states ranging from Texas to Maine. This is almost a 25% return for the past two year which keeps it tracking behind the Dow Jones Industrial Average for the same time period. During this time the Dow was up 32%.
- California Water Service Group (NYSE: CWT): This water company is a utility that serves California, Washington, New Mexico, and Hawaii, and American States Water Co. Last year it was the one under performer in the group down 1.2%. In 2013 it rebounded up 26% for the year.
- American States Water Company (NYSE: AWR): This California-based utility provides water, electric, and contracted services in the United States. In 2013 it rose 20%, closing at 28.73 at year end. If you recall last year it was a $45 dollar stock and last September it issued a 2 for 1 stock split. During the past two years this stock is up 50%.
Invest in Water Exchange Traded Funds
Another option is to invest in water Exchange Traded Funds (ETF). Think of an exchange traded fund as a mutual fund that trades on a public exchange, like the New York Stock Exchange. You get the diversification of a fund with the added benefit of the liquidity of a public exchange. This past year the ETFs out performed the water stocks. Below is the past performance of a few of the popular water ETFs:
- PowerShares Global Water Portfolio (PIO): This ETF is based on the Palisades Global Water Index. It focuses on companies providing potable water. The year the ETF was up 28% closing at 23.10 last week. Last year it was up 11%
- PowerShares Water Resources Portfolio (PHO): The largest Water ETF with more than $1 billion in assets. It also invests in companies providing potable water. In 2013 it was up 26%, closing at 26.22. This was after gaining 20% in 2012.
- Guggenheim S&P Global Water Index ETF (CGW): This ETF corresponds to the S&P Global Water Index. This ETF is the first US listed global Water ETF. It was up 24% in 2013 closing at 27.65 after gaining 17% in 2012.
- First Trust ISE Water Index Fund (FIW): Focuses on companies with waste water and potable water direction. It is up 30% this year after rising 20% last year. The ETF finished the year at 33.84
As you can see 2013 was a big year for the stock market and water stocks. Measuring just last year’s performance almost all the water stocks underperformed the Dow, S&P 500 and Nasdaq. Looking at the three year performance the Dow was up 42%, the S&P 500 Index up 45% and the Nasdaq up 55%. During the same time period AWK and AWR had gains of 65% and 64% respectively. FIW was up 51%, PHO up 36%, CGW up 32%, CWT up 23% , WTR up 30% and PIO up 15%. Some of the stocks outperformed and some underperformed the popular indexes. One interesting point is the year the indexes were flat (2012 Dow up 6% and the water stocks with one loser and the rest up 11 – 30%) the water stocks performed well. They may be an interesting play in 2014 especially if you think the stock market is ready to adjust. Please do not take any of the information on this post as a recommendation to buy the stocks or ETFs. This is simply an attempt to start a meaningful conversation on the blog about investing in water. What do you think is in store for the stock market and water stocks in 2014?
Learn More About Richard Restuccia
If you like this post please consider subscribing to the blog or follow me on twitter at @H2oTrends.
I jumped into the water investment pool last year with the Guggenheim ETF and am happy to say it is up 22% which is slightly better than the rest of my portfolio. My grandfather used to say invest in land because they aren’t making any more of it. The same can be said about water and people need water more than land.
I’m glad that investment worked out for you Alan. Why did you pick Guggenheim over the other 7 stocks?
I wanted the diversity of an ETF and went with CGW because I like several of the companies they invest in and are blended 62% international/38% US.
Very timely article for me personally. I plan to begin investing this year and I was thinking to go with the advice to invest in something people will always need. Water is an obvious constant need. Being extremely new to the investing world, I didn’t realize these watery options were available. Thank you so much for sharing! And I won’t hold you responsible if I end up taking a bath.
This sounds like a good investment and something most people never think about. I need to take a hard look at this and possibly adjust my investments to include water.