In this article, we discuss 11 best water stocks to buy. If you want to skip our discussion on the water industry, head directly to 5 Best Water Stocks To Buy.
2023 has been riddled by volatility due to political, economic, and environmental factors that have had a cascading effect on the water sector, impacting M&A activities and deal flow. Concerns about a potential recession, the ongoing crisis in Ukraine, and record-breaking global temperatures have all impacted water assets. Despite these challenges, the underlying fundamentals of the water industry continue to attract a diverse range of investors, including private equity funds and well-established industrial manufacturing companies. While the cost of capital has increased, there is an influx of infrastructure funding from the U.S. and EU into municipal markets, as per a report by Bluefield Research. The competition for deal origination is intensifying, and there is a constant need to adapt portfolios for growth in this dynamic environment.
Due to climate change, a growing global population, and technological advancements, water management is evolving swiftly. According to WaterColor Management Insurance & Risk Management, the water treatment industry is witnessing significant trends that will reshape its landscape in 2024. Firstly, the adoption of digitalization is revolutionizing water management, ensuring improved quality and quantity control with the support of technologies like 5G, blockchain, and cloud solutions. Secondly, wastewater processing is evolving through advanced oxidation processes, adsorption/biosorption, and biological remedies to reduce pollutants. Advanced filtration, driven by nanotechnology, is allowing the development of membranes that efficiently remove micropollutants, while biological filtration is gaining recognition as well. Moreover, flood prevention is advancing with improved designs, monitoring, forecasting, and catastrophe modeling. Water-saving technologies, including water reuse, recycling, and intelligent irrigation, are gaining momentum. Decentralized infrastructure is becoming popular for enhancing community resilience, with modular and mobile treatment systems providing alternatives to centralized systems. Furthermore, material science is contributing innovative materials to enhance water management efficiency. Lastly, desalination is evolving with a focus on cost reduction and environmental impact mitigation, utilizing renewable energy and biomimicry for salt extraction from seawater.
Deloitte observed that electric power companies are increasingly recognizing and disclosing water risk in their financial reports, highlighting potential challenges such as reduced generation and negative business impacts due to factors like inadequate precipitation, drought, and regulatory actions limiting water supplies. The rising water stress has led to increased water costs, particularly evident in nuclear power plants where average water and coolant expenses rose from US$138 to US$140 per megawatt between 2021 and 2022. Thermal power plants, relying on water for cooling, face efficiency issues and environmental regulations restricting water discharge. Western hydroelectric plants may be at risk of shutdown due to low water levels, but overall, the US power production has become less water-intensive over the years. The growth of wind and solar photovoltaic generation is expected to contribute to this trend as they don’t rely on cooling water. However, the emerging trend of using electrolysis for green hydrogen production could potentially raise water consumption. To address water sustainability, power plants are exploring alternatives such as using brackish water, greywater, or recycled water for cooling instead of freshwater.
Some of the best water stocks to buy according to hedge funds include Ecolab Inc. (NYSE:ECL), Xylem Inc. (NYSE:XYL), and American Water Works Company, Inc. (NYSE:AWK).
Our Methodology
We chose the top water stocks based on overall hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 910 elite hedge funds tracked as of the end of the third quarter of 2023. The list is arranged in ascending order of the number of hedge fund holders in each firm.
A vast hydroelectric generation plant with a powerful waterfall cascading downwards.
Best Water Stocks To Buy
11. Global Water Resources, Inc. (NASDAQ:GWRS)
Number of Hedge Fund Holders: 5
Global Water Resources, Inc. (NASDAQ:GWRS) specializes in the management of water resources. It owns, runs, and oversees controlled water, wastewater, and recycled water systems, mainly in the metropolitan areas of Phoenix and Tucson, Arizona. On November 9, Global Water Resources, Inc. (NASDAQ:GWRS) reported a Q3 GAAP EPS of $0.11 and a revenue of $14.5 million, outperforming Wall Street estimates by $0.03 and $1.2 million, respectively. Additionally, on November 30, the company declared a $0.0251 per share monthly dividend, a 1.2% increase from its prior dividend of $0.0248. The dividend is payable on December 28, to shareholders of record on December 14.
According to Insider Monkey’s third quarter database, 5 hedge funds were bullish on Global Water Resources, Inc. (NASDAQ:GWRS), same as the prior quarter. Chuck Royce’s Royce & Associates is the leading position holder in the company.
In addition to Ecolab Inc. (NYSE:ECL), Xylem Inc. (NYSE:XYL), and American Water Works Company, Inc. (NYSE:AWK), Global Water Resources, Inc. (NASDAQ:GWRS) is one of the best water stocks to monitor.
10. Middlesex Water Company (NASDAQ:MSEX)
Number of Hedge Fund Holders: 6
Middlesex Water Company (NASDAQ:MSEX), established in 1896 and headquartered in New Jersey, owns and operates regulated water utility and wastewater systems. The company operates in two segments – Regulated and Non-Regulated. It is one of the best water stocks to buy.
On October 20, Middlesex Water Company (NASDAQ:MSEX) declared a $0.325 per share quarterly dividend, a 4% increase from its prior dividend of $0.313. The dividend was paid on December 1, to shareholders of record as of November 16.
According to Insider Monkey’s third quarter database, 6 hedge funds were long Middlesex Water Company (NASDAQ:MSEX), compared to 7 funds in the last quarter. John Overdeck and David Siegel’s Two Sigma Advisors is one of the leading stakeholders of the company, with a position worth $649,250.
9. California Water Service Group (NYSE:CWT)
Number of Hedge Fund Holders: 8
California Water Service Group (NYSE:CWT) offers water utility and related services across California, Washington, New Mexico, Hawaii, and Texas. The company engages in different aspects of water management, including production, procurement, storage, treatment, testing, distribution, and the sale of water for domestic, industrial, public, irrigation, and fire protection purposes. It is one of the top water stocks to invest in.
On October 25, California Water Service Group (NYSE:CWT) declared a quarterly dividend of $0.26 per share, in line with previous. The dividend was distributed to shareholders on November 17.
According to Insider Monkey’s third quarter database, 8 hedge funds were bullish on California Water Service Group (NYSE:CWT), compared to 14 funds in the earlier quarter. Ian Simm’s Impax Asset Management is the leading stakeholder of the company, with 1.5 million shares worth $74.3 million.
8. Consolidated Water Co. Ltd. (NASDAQ:CWCO)
Number of Hedge Fund Holders: 8
Consolidated Water Co. Ltd. (NASDAQ:CWCO) is engaged in designing, constructing, managing, and operating water production and treatment plants primarily in the Cayman Islands, the Bahamas, and the United States. The company utilizes reverse osmosis technology to convert seawater into potable water. Consolidated Water Co. Ltd. (NASDAQ:CWCO) supplies water to residential, commercial, and government customers, and offers different water-related products and services, including desalination equipment, membrane separation equipment, filtration equipment, and engineering services for water production and treatment projects. It is one of the best water stocks to watch.
On November 28, Consolidated Water Co. Ltd. (NASDAQ:CWCO) declared a $0.095 per share quarterly dividend, in line with previous. The dividend is payable on January 31, 2024 to shareholders of record on January 2.
According to Insider Monkey’s third quarter database, 8 hedge funds were bullish on Consolidated Water Co. Ltd. (NASDAQ:CWCO), compared to 6 funds in the prior quarter. Israel Englander’s Millennium Management is the leading stakeholder of the company, with 94,443 shares worth $2.68 million.
7. The York Water Company (NASDAQ:YORW)
Number of Hedge Fund Holders: 11
The York Water Company (NASDAQ:YORW) is involved in impounding, purifying, and distributing drinking water. It manages wastewater collection and treatment systems. Established in 1816, the company is headquartered in York, Pennsylvania. The York Water Company (NASDAQ:YORW) is one of the best water stocks to buy.
On November 3, the company reported a Q3 GAAP EPS of $0.53 and a revenue of $18.77 million, outperforming Wall Street estimates by $0.17 and $1.77 million, respectively. Revenue for the period increased 18.7% on a year-over-year basis.
According to Insider Monkey’s third quarter database, 11 hedge funds were bullish on The York Water Company (NASDAQ:YORW), same as the prior quarter. Stuart J. Zimmer’s Zimmer Partners is the biggest stakeholder of the company, with 764,955 shares worth $28.6 million.
6. SJW Group (NYSE:SJW)
Number of Hedge Fund Holders: 12
SJW Group (NYSE:SJW) offers water utility services in the United States, operating in two segments – Water Utility Services and Real Estate Services. The company is involved in different aspects of water services, including production, purchase, storage, purification, distribution, wholesale, and retail sale of water and wastewater services.
On October 30, SJW Group (NYSE:SJW) announced a Q3 GAAP EPS of $1.13 and a revenue of $204.8 million, topping Wall Street estimates by $0.18 and $17.8 million, respectively. The company also paid a $0.38 per share quarterly dividend on December 1.
According to Insider Monkey’s third quarter database, 12 hedge funds were bullish on SJW Group (NYSE:SJW), compared to 9 funds in the prior quarter. Israel Englander’s Millennium Management is the largest stakeholder of the company, with 56,228 shares worth $3.3 million.
Like Ecolab Inc. (NYSE:ECL), Xylem Inc. (NYSE:XYL), and American Water Works Company, Inc. (NYSE:AWK), SJW Group (NYSE:SJW) is one of the best water stocks to invest in.
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Disclosure: None. 11 Best Water Stocks To Buy is originally published on Insider Monkey.