Will Water Stocks Continue To Flow Upstream?

The fluctuation of water stocks was briefly discussed on PreMarket Prep with John Bartlett from Reaves Asset Management.

Bartlett is an analyst and portfolio manager at Reaves Asset Management, a research-based investment management company founded in 1961. Reaves is known for its expert investing in utilities, telecom and energy infrastructure securities, focusing on preserving capital, generating current income and delivering long-term growth to investors.

On Monday's show, Bartlett discussed the growing interest in water-related utility stocks.

Since the Flint water crisis, there has been a growing market for water stocks, especially American Water Works Company Inc AWK as companies start to see the true value in water as a commodity.

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Bartlett said his company owns several shares of American Waterworks. Bartlett predicts in the next 10 to 20 years, there is a very safe and predictable stable earnings growth in a business that's a true monopoly. Bartlett discussed how this particular business is going to become tougher to manage, so as a consequence, people are going to look to companies such as American Waterworks to take systems off their hands.

As municipal governments continue to be troubled, Bartlett predicts they're going to increasingly look to privatize water systems.

Over the past 12 months, there has been a significant increase in this sector. Since there are few large water companies when events like this happen, there are few stocks for people to own.

Bartlett explained how Reaves took some profit in American Waterworks when it was added to the S&P 500, but regrets doing so. He feels the fundamentals are strong enough.

Bartlett said there will continue to be good appetite for demand of the stock, especially when you consider what the other alternatives might be to get that level of earnings growth over time.