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These companies fight water scarcity, manage current resources – and overtake the market.
Water is one of the most valuable resources in the world. And in many areas around the world it is getting more and more difficult.
Some of the companies listed below are helping to combat water scarcity. Others are developing technologies that make drinking water production more efficient. And still others simply manage the current water, which many of us already have access to.
In all of these cases, these publicly traded companies are leveraging their available talent, resources, and technology to alleviate water problems and find long-term solutions.
For investors keen (pun intended) to tap into water stocks, the five companies listed below all have some dedication to water management – and all of them generate market-leading returns.
- American waterworks
- Xylem Inc.
- Energy recovery
- Danaher Corp.
American Water Works (NYSE: AWK)
- American waterworks (NYSE: AWK)
- Price: $ 174.57 (as of November 19, 2021)
- Market capitalization: $ 31.475 billion
Water management is perhaps not the most exciting investment segment. But it can be a very lucrative avenue for investors. One example of this is American Water Works, whose share price has skyrocketed more than 700% since it went public in 2008.
How’s that for a refreshing investment?
Share price development aside, American Water Works is the leading US water company with facilities in 46 states and serving more than 15 million people.
Eco-conscious investors will also appreciate that the company has been named one of the 100 Most Sustainable Countries in the US for four consecutive years, according to the company Barrons. It was also the highest-rated utility on this list for 2021.
As a regulated utility, investors shouldn’t expect staggering growth. Nevertheless, American Water Works continues to grow. Operating income increased 6% and regulated business net income 16% in the first half of 2021.
In addition to organic customer growth, the company made 14 acquisitions in six states in 2021 to further expand its presence. American Water Works also expects to complete two acquisitions of major water companies by the end of the year.
Dividend investors will love American Water Works, too. The company currently pays a dividend yield of around 1.4%.
Xylem Inc. (NYSE: XYL)
- Xylem (NYSE: XYL)
- Price: $ 127.61 (as of 11/19/2021)
- Market capitalization: $ 23.28B
According to Xylem, an estimated 1.8 billion people will be living in countries with water scarcity by 2025. This is why the company and its water engineering systems are so important.
Xylem says it is “committed to solving water by developing innovative and intelligent technology solutions to meet the world’s water, wastewater and energy needs.” To this end, it uses everything from intelligent ventilation and advanced filtration systems to chemical-free disinfection to provide water solutions in 150 countries.
Xylem’s sales increased 14% in the first six months of 2021 compared to the same period in 2020. Net income increased nearly 190%.
The company recently recognized the impact the global chip scarcity is having on its business. However, Xylem’s management continues to expect sales growth of between 3% and 4% for the full year 2021. Adjusted earnings per share (EPS) are expected to increase by around 20% compared to the previous year.
Xylem’s unique approach to developing clean water technology solutions around the world makes it a company to be proud of and invest in in. At the same time, its share price has easily managed to outperform the S&P 500 over the past three years with potential for outperforming earnings.
Energy recovery (NASDAQ: ERII)
- Energy recovery (NASDAQ: ERII)
- Price: $ 23.74 (as of November 19, 2021)
- Market capitalization: $ 1.371 billion
The UN estimates that water demand will increase by 30% over the next thirty years. Some companies like Energy Recovery want to help by tapping into one of the world’s most abundant resources: salt water.
But to make salt water drinkable, you have to desalinate it. Traditionally, desalination has been less than environmentally friendly. Many processes require the use of fossil fuels and increase greenhouse gas emissions.
Energy Recovery equipment offers a more sustainable option by reducing energy consumption during the desalination process by up to 60% compared to a typical system.
Just as impressive? When the Energy Recovery system is running, there are no emissions.
In fact, the company claims that 89% of its total product sales came from renewable energy and efficiency-related products. And Energy Recovery’s pressure exchange systems have helped other companies avoid 12.4 million tons of CO2 emissions.
In the first half of 2021, the company’s financial position was not exactly rosy. The income collapsed. However, this decrease was due to the planned expiry of a license agreement. Investors will be pleased to learn that product sales increased 30% over the same period.
Even with a tough start to 2021, the energy recovery was a solid long-term investment. The share price has risen 155% over the past three years.
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Pentair (NYSE: PNR)
- Pentair (NYSE: PNR)
- Price: $ 77.82 (as of November 19, 2021)
- Market capitalization: $ 13.129 billion
Pentair is a global company with a wide range of products for water management. This includes everything from municipal wastewater and water treatment to agricultural irrigation and food production to household filtration.
The company’s net sales increased 27% in the first half of 2021 compared to the first half of 2020. Net income increased 80%.
On the third quarter earnings conference call, management said that while Pentair has faced supply chain difficulties and inflation challenges (like virtually every other company does now), it still had a very strong year. These include 25% year-to-date sales growth, 40% growth in earnings per share and increasing margins.
It’s not always easy to find water stocks that are not only growing but also outperforming the S&P 500. But Pentair delivers both: its share price has risen 77% over the past three years.
Danaher Corp. (NYSE: DHR)
- Danaher (NYSE: DHR)
- Price: $ 313.73 (as of November 19, 2021)
- Market capitalization: $ 224.47 billion
Danaher is a globally diversified conglomerate based here in the United States. It’s not just water management, but investors might be interested in seeing several of its subsidiaries focus on water management.
The company says some of its water management devices “help analyze, treat, and manage the world’s water” – from municipal and sewage treatment plants to natural water resources, including lakes and oceans.
In fact, the US Geological Survey has been using equipment from Danaher’s subsidiary Aquatic Informatics since 2005 to manage water data from 16,500 streams, groundwater locations, and other water precipitation sites.
Danaher’s sales increased 46% in the first six months of 2021 and net income 129% compared to the same period in 2020. And the company’s management said in the third quarter that its water quality sales segment was in the mid-single digits has grown.
Danaher has an extensive reach in the field of water management. And it’s been a fantastic investment over the past three years as well, as the stock price is up more than 190%.