Water Stocks: Will Top CEOs Start Taking Water Risk Seriously?

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Companies that require water, either as an ingredient in a product like soda and beer, or as a way to grow crops like corn and coffee beans, they need to be hedging against future water shortages.

"Water is something that should be keeping CEOs up at night," says Brooke Barton, who runs water programs at Ceres, an environmental group in Boston.

Fresh water is a fixed commodity, and it faces a rapidly increasing demand from a growing middle class in emerging countries and increased scarcity from global climate change.

It's why Barton works with companies "to create an online checklist aimed at helping investors and companies assess efforts to manage water risk," reports Bloomberg.

"We're not talking about charity here," says Jonas Kron, who has led a shareholder challenge to J.M Smucker, which is as famous for its fruit jam as it is for its Folger's coffee. "These are investors seeking to have the company address the risks in its supply chain."

Krom tells Bloomberg that companies are realizing more and more how water can affect their bottom line.

He notes that companies actively dealing with carbon emissions are generally outperforming their peers. "It will be real interesting to see if a similar relationship will be observed between water management performance and stock value. Come and talk to me in a year."

Business section: Investing ideas
The rising demand for this basic need is fueling an industry devoted to providing solutions, especially as it increasingly affects corporations and developed nations that tend to have a bit more money and motivation to kick things into gear.

So as long as water shortages continue to plague profit margins and wealthy regions, investors might want to consider the possibility of tracking utility stocks exposed to the trend.

Looking for ways to trade this trend? Here is a list of water utilities trading on U.S. markets. Use the links below to analyze further.

List sorted alphabetically. (Click here to access free, interactive tools to analyze these ideas.)

1. Artesian Resources: Provides water, wastewater, and engineering services on the Delmarva Peninsula. Market cap of $161.66M. Relatively low correlation to the market (beta = 0.39), which may be appealing to risk averse investors. The stock has gained 5.97% over the last year.

2. American Water Works (NYS: AWK) : Provides water and wastewater services to residential, commercial, industrial, public, and other customers in the United States and Canada. Market cap of $5.69B. Relatively low correlation to the market (beta = 0.31), which may be appealing to risk averse investors. The stock has gained 8.42% over the last year.

3. American States Water: Provides water, electric, and contracted services in the United States. Market cap of $660.02M. Relatively low correlation to the market (beta = 0.34), which may be appealing to risk averse investors. The stock has gained 2.5% over the last year.

4. Connecticut Water Service (NAS: CTWS) : Operates as a regulated water company in Connecticut. Market cap of $236.42M. Relatively low correlation to the market (beta = 0.46), which may be appealing to risk averse investors. The stock has gained 6.66% over the last year.

5. Consolidated Water: Develops and operates seawater desalination plants and water distribution systems. Market cap of $129.44M. The stock has gained 2.07% over the last year.

6. California Water Service Group (NYS: CWT) : Provides water utility and other related services in California, Washington, New Mexico, and Hawaii. Market cap of $759.03M. Relatively low correlation to the market (beta = 0.29), which may be appealing to risk averse investors. The stock has gained 2.66% over the last year.

7. Middlesex Water: Operates regulated water utility and wastewater systems in New Jersey, Delaware, and Pennsylvania. Market cap of $293.38M. Relatively low correlation to the market (beta = 0.48), which may be appealing to risk averse investors. The stock has gained 7.75% over the last year.

8. Pennichuck (NAS: PNNW) : Engages in the collection, storage, treatment, and distribution of potable water for domestic, industrial, commercial, and fire protection service markets primarily in New Hampshire. Market cap of $135.59M. Relatively low correlation to the market (beta = 0.33), which may be appealing to risk averse investors. The stock has gained 2.81% over the last year.

9. SJW (NYS: SJW) : Engages in the production, purchase, storage, purification, distribution, wholesale, and retail sale of water. Market cap of $433.15M. Relatively low correlation to the market (beta = 0.6), which may be appealing to risk averse investors. The stock has gained 2.37% over the last year.

10. Aqua America: Operates regulated utilities that provide water or wastewater services in the United States. Market cap of $2.99B. Relatively low correlation to the market (beta = 0.2), which may be appealing to risk averse investors. The stock has gained 2.32% over the last year.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Data sourced from Finviz.

At the time this article was published The Motley Fool owns shares of California Water Service Group. Motley Fool newsletter services have recommended buying shares of Aqua America and California Water Service Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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