PowerShares Water Resources (ETF) (NYSEMKT:PHO)

CAPS Rating: 4 out of 5

Exchange Traded Fund

Recs

16
Player Avatar AllStarPortfolio (38.77) Submitted: 5/13/2009 7:01:49 PM : Outperform Start Price: $13.17 PHO Score: -11.77

RonChapmanJr: 99.79

The Basics
"The Index seeks to identify a group of companies that focus on the provision of potable water, the treatment of water, and the technology and services that are directly related to water consumption. The Index includes United States exchange traded companies drawn from water sectors, such as water utilities, treatment, analytical, infrastructure, water resource management and multi business."

Upsides

1. Macro-trend -
I could give a biology lesson here about why water is valuable, but I am going to assume that you already understand that, no water = no life. Ok, so why is water worth investing in then?

In one word – “demand”

Econ 101 - Supply and Demand

9,309,051,539
That is the number of people estimated to be living on the earth in 2050. Will it actually get that high? Beats me, but with an estimated 1 billion people already without access to safe drinking water, I don’t think the picture looks pretty even if it falls short by a billion or so. Add into the mix the amount of pollution our earth’s current 6.5 billion inhabitants are spewing out at an alarming rate, the affects that has on worldwide water supplies, and I think it will be safe to say, “Houston, we have a problem!”

Given this problem, what are possible solutions for individuals and countries?
1. Get water
2. Die
So what do I think will be the result of this increased demand and diminished supply?

Increasing water prices? - Yeah
Terrorist attacks on water supplies/infrastructures? - Check
Strain on the current water infrastructure? - No doubt
Wars over water supply? - Yup
Billions and possibly trillions of dollars for companies that can produce, clean, deliver, and monitor water? - Obviously

2. Diversification -
As with most ETFs, there is instant diversification. Lots of different companies serving different parts of the world and focusing on different aspects of water.

Downsides

Weak dividend, but it is better than nothing. Given the expected price apprecation of this ETF, just consider the dividend a gift.

2. Looooong term hold
Don't expect to retire in a few years from investing in this one. I see this as a steady play for several years and then larger and larger increases as the macro effects discussed earlier take over.

So there it is. Good ole’ H2O. In terms of investing, water is often referred to as the “next oil” and/or “liquid gold”. Which of these do I believe is most accurate? Neither, because I believe it will be a better investment than either of those.

Member Avatar SolarisKing (< 20) Submitted: 5/16/2009 9:10:40 PM
Recs: 6

List of holdings http://www.invescopowershares.com/products/holdings.aspx?ticker=pho

Industrials 78.36%

VMI Valmont Industries Inc. 5.38%
ACM AECOM Technology Corp. 5.21%
TTEK Tetra Tech Inc. 5.05%
URS URS Corp. 5.02%
DHR Danaher Corp. 4.71%
BMI Badger Meter Inc. 4.01%
FLS Flowserve Corp. 3.64%
SI Siemens AG (ADS) 3.57%
AMN Ameron International Corp. 3.40%
PLL Pall Corp. 3.21%
LNN Lindsay Corp. 3.21%
WTS Watts Water Technologies Inc. (Cl A) 3.16%
ROP Roper Industries Inc. 3.11%
MWA Mueller Water Products Inc. 3.11%
IEX IDEX Corp. 3.11%
PNR Pentair Inc. 3.10%
FELE Franklin Electric Co. Inc. 3.08%
ITT ITT Corp. 2.74%
LAYN Layne Christensen Co. 2.71%
GRC Gorman-Rupp Co. 2.67%
NWPX Northwest Pipe Co. 2.61%
INSU Insituform Technologies Inc. (Cl A) 2.55%

Information Technology 4.56%
ITRI Itron Inc. 4.56%

Materials 5.86%
NLC Nalco Holding Co. 3.50%
CCC Calgon Carbon Corp. 2.36%

Utilities 11.22%
VE Veolia Environnement (ADS) 5.83%
CWCO Consolidated Water Co. Inc. 1.62%
SBS Companhia de Saneamento Basico do Estado de Sao Paulo (ADS) 1.16%
AWK American Water Works Co. 0.91%
AWR American States Water Co. 0.87%
WTR Aqua America Inc. 0.82%

I notice VE and VMI are the largest proportional holdings of this ETF, Other water names i recognize are TTEK, DHR, FLS, SI .. . . . Well in fact i know over half the names on this list. I agree that water will eventually (soon) be one of the most sought after and profitable investments EVER. Buy and Forget.

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