Investors have been told to be patient before investing in this resource for a long time. Perhaps now investors should consider this sector ready to take off. The water infrastructure investment boom is here. The EPA estimated that over 1 trillion dollars will be needed over the next 30 years just to maintain the viability of basic water infrastructure. That sounds like a good long term investment.
John Gabriel wrote a Morningstar report in 2014 highlighting the need for prudence as the fund is not a “pure water” play – there is pipe and pumping manufacturing along with water treatment and 16% of the portfolio is invested in water utilities – which have significant industries outside the investable water complex.
That’s not to say the fund won’t participate in the upcoming water boom. With the recent crisis of Flint, Michigan, Americans are now more aware than ever that water treatment and filtering systems are an important process when providing water. As fresh water supplies tighten and government regulations become more onerous, that could be the catalyst that launches this sector into a long term bullish frenzy.
PHO is an interesting play in the water world. The Invesco ETF has about 750 million in assets spread over 28 different water stocks. One thing to keep in mind is that some of the bigger water players like GE and Dow Chemical are excluded because significant revenue is generated outside the sector. However, that means the stocks included can greatly benefit by providing customized solutions that larger companies might not be able to fulfill.
Emerging markets see water infrastructure demand growing at a 10% rate. That’s an attractive growth rate and between that and America’s needs, water might not be the slow and steady “boring” investment that past investors passed up for more lucrative plays. The world doesn’t only need water, it needs piping, pumping and filtration. That is why this sector is a lot more than just water. It’s an infrastructure play that has been dormant for far too long.
PHO is just one of many water options to invest in, but from a technical analysis perspective, there is something I like that tells me to start a position sooner than later. If you look at the chart below, the 200 ma is about to be breached and become support again. The last time this happened PHO went on a 25% bullish run. If you get in now, it’s possible this ETF could be raining profits in your portfolio for a long time to come.