Market Overview

California Drought And Water ETFs

California Drought And Water ETFs

An interesting investment opportunity has recently emerged in an otherwise overlooked sector: water. California is in the midst of a four-year drought that has taken its supply of water down to one year according to NASA.

With a population of 39 million people and holding the title of the largest farming state in the country, California is in a state of emergency. Consider, for instance, that the state produces more food from farming than Iowa, Nebraska and Minnesota combined.

Continental Implications

This is not just a California problem; due to the size of the state's economy, the ramifications will be felt around the country. Everything from higher almond prices to the potential loss of jobs is possible. That being said, there is almost always an investment angle when a crisis occurs, and this time is no different.

Related Link: California Drought's First Ever Statewide Water Restrictions

An investor could consider purchasing individual stocks that manufacture and produce water conservation technologies. However, there is a broader approach to the water sector that includes several related ETFs.

Highlighted below are three water ETFs that have been and will continue to be affected by the drought in California.

PowerShares Water Resources Portfolio ETF

The Powershares Water Resource Portfolio (NYSE: PHO) is made up of 28 companies across nine sectors that create products designed to conserve and purify water for homes, businesses and industries. The top weighted sub-sectors include machinery at 48 percent and water utilities at 18 percent.

The top individual holding include:

  • Waters Corporation (NYSE: WAT) at 8.4 percent
  • Roper Industries, Inc. (NYSE: ROP) making up 8.3 percent
  • Pall Corporation (NYSE: PLL) coming in at 7.8 percent

PHO is down 7 percent over the last 12 months, up 3 percent over the last six months and down 3 percent year-to-date. The water ETF has an expense ratio of 0.61 percent.

PowerShares Global Water Portfolio ETF

The PowerShares Global Water Portfolio (ETF) (NYSE: PIO) provides investors exposure to 35 companies across five sectors and 10 countries. The United States at 40 percent and the United Kingdom at 21 percent are the top weighted countries. Industrials at 52 percent and utilities at 39 percent make up the majority of the portfolio.

The top holdings include:

  • Geberit AG (OTC: GBERY) with an 8.5 percent holding
  • Roper Industries making up 8.2 percent
  • Veolia Environnement VE SA (ADR) (OTC: VEOEY) coming in at 7.9 percent

PIO is down 5 percent over the last 12 months, up 5 percent over the last six months and up 2 percent year-to-date. The ETF has an expense ratio of 0.82 percent.

First Trust Water Index Fund

The First Trust ISE Water Index Fund (ETF) (NYSE: FIW) consists of 37 companies across six sectors within the potable and wastewater industry.

The top individual holdings includes

  • Badger Meter, Inc. (NYSE: BMI) at 4.4 percent
  • Pentair plc. Ordinary Share (NYSE: PNR) making up 4.2 percent
  • California Water Service Group (NYSE: CWT) totaling 4.2 percent as well

FIW is down 8 percent over the last 12 months, up 2 percent over the last six months and down 5 percent year-to-date. The water ETF has an expense ratio of 0.60 percent.

Image Credit: Public Domain

Posted-In: California NASASector ETFs Specialty ETFs Commodities Markets Trading Ideas ETFs Best of Benzinga


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