Thirsty for Profits? Go Get Some Water - Powershares Water Resources (PHO)

With World Water Week in Stockholm, Sweden upon us, it’s no wonder there are many news stories cropping up detailing the looming water crisis around the world.

It was reported in a recent Reuters news story that a third of the world is facing water shortages because of poor management of water resources  and soaring usage driven mainly by agriculture.

Said Frank Rijsberman, the Director of the International Water Management Institute, "Without improvements in water productivity … the consequences of this will be even more widespread water scarcity and rapidly increasing water prices." He went on to say, "The water is there, the rainfall is there, but the infrastructure isn’t there."

The BBC reports that the world’s supply of fresh water is running out.  Already, one in five people have no access to safe drinking water.

China is beginning to recognize its own water problem .. we all know what happens to a commodity when China gets thirsty (see oil, steel, precious metals).  In a story out just hours ago, China admits its at a crossroads in dealing with its urban water problems which continues to worsen.  It expects to spend 125 billion over the next 5 years to improve sewage works, pipes, add desalination plants and projects like the massive South - North water diversion scheme.

Closer to home comes a story out of Central Washington regarding a Northwest water crises, the rapid depletion of the Odessa Aquifer.  As the underground water resource gets overused, farmers are having to drill deeper wells in order to keep their crops alive.  Says Craig Smith of the Northwest Food Processors Association, "Not only are we going to lose agricultural operations and family farms but we’re going to lose food processors and a large number of family wage jobs.  The bottom line here is that this area is a huge production area not only for potatoes but sweet corn and many other crops that are essential to the economy of the State of Washington."

Heck, even world renowned rapper Jay-Z is sounding the horn about the world water crisis by spreading awareness through a seven week world tour beginning September 9th in Krakow, Poland which will be taped for an MTV documentary.

I could probably go on for an hour with blurbs and news links regarding world water shortages, but you get the idea about increasing public awareness of this growing problem.  It’s important we all do our small part by helping to conserve water.. at the same time we can profit from the companies helping to improve infracture, provide distribution, desalination products/facilities.  There is no better diversified way that I know of then the Powershares Water Resources ETF (PHO).   

During the recent market correction, PHO underwent a correction of its own.  With corrections, comes opportunities.. and that is no exception here in the Water Resources ETF (PHO).  In the past few weeks, the ETF has put in what appears to be a bottom as demand has picked up considerably and the stock clears key resistance of the 50 day moving average to begin a new uptrend.  Given the steep sell off during the correction, it may need to spend more time basing, but if you’re a long term holder, the time is absolutely right to consider shares of the PowerShares Water Resources ETF (PHO).  


This is a well diversifed ETF with no holding more than 4% of the fund.  The largest holding is currently Watts Water Technologies (WTS) which happens to be near a break out.  The stock recently gapped up more than 20% on strong earnings results and subsequent upgrades.  There are several individual high quality stocks that profit in the water industry, but another one I like is Consolidated Water (CWCO) which has more of a global presence by providing water services and products to the Bahamas, Barbados, Belize and Cayman Islands.  It too has formed a base and is near a break out above the top of its handle at 28.28.  

Posted on August 23rd, 2006 | ETF Articles

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