Water exchange traded funds, such as the Invesco Global Water Portfolio (NASDAQ: PIO), are quietly delivering solid performances this year while offering investors bright long-term outlooks.
Water investing is a good way to play a long-term trend as the world still needs to find sustainable sources of potable fresh water, especially with the specter of climate change. PIO features exposure companies that are associated with global water utilities, infrastructure, equipment, instruments and materials.
A variety of fundamental factors and data points underpin the long-term PIO thesis.
“Water is essential to the production and delivery of nearly all goods and services. Many businesses are reliant on a sufficient flow of clean water to operate and realize their growth ambitions,” according to S&P Dow Jones Indices. “Overconsumption of water, water pollution, environmental degradation, and changing climatic conditions are making clean water an increasingly scarce resource. As the world population grows and competition for water resources between industry sectors intensifies, nations are set to experience a 40% shortfall in water by 2030.”
Plenty of PIO Potential
As the world reviews the effects of climate change, global population growth and inadequate or aging infrastructures, investors can consider water industry-related exchange traded funds to capture potential long-term opportunities.
Some countries, including the U.S., are leveraging technology to reduce water use and that speaks to the long-term potential of funds like PIO.
“As these demands for clean water increase, companies involved in water-related business activities stand to grow in the coming years,” notes S&P Dow Jones.
The World Energy Council estimates that total power demand for water is expected to rise 100 billion cubic meters by 2050. For instance, Asia faces challenges to water supply for power generation to meet growing population and associated power requirements. China alone is projected to see water demand rise 15% in the next 40 years.
The $219 million PIO, which is more than 13 years old, tracks the Nasdaq OMX Global Water Index.
“The Fund generally will invest at least 90% of its total assets in companies listed on a global exchange that create products designed to conserve and purify water for homes, businesses and industries,” according to Invesco.
The fund holds 53 stocks, three-quarters of which hail from the industrial and utilities sectors.
For more on innovative portfolio ideas, visit our Nasdaq Portfolio Solutions Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.