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5 Ways to Invest in the Most Valuable Resource on the Planet

Most readers are probably aware that Harvard alumni make significant contributions to their alma mater. More specifically, alumni have made contributions to the Harvard Endowment Fund that have allowed it to grow to the tune of about $42 Billion. Now, to be fair, this fund has existed in some form or another for nearly four centuries and contributions are frequently earmarked for specific legacy purposes.

That being said, the fund, which was previously managed by famed bond investor Mohamed El-Erian, is widely regarded as some of the smartest money on Wall Street. Following the smart money has a tendency to pay off for investors; so, what is the Harvard Endowment Fund investing in these days?

For the last several years, the fund has invested a portion of that $42 Billion in California vineyard land. Not for the land itself, but for the associated water rights.

Most of us take water for granted. It’s the most abundant resource on the planet after all, and it’s normally cheap – $2 per 1,000 gallons, for the average American. But all I have to do is utter the words “Flint, Michigan” to remind you that not everyone is so fortunate, even here in the U.S.

Globally, 785 million people lack access to clean water; 2.1 billion people don’t have clean drinking water in their homes. Progress has been made, for sure; between 1990 and 2015, 2.6 billion people in developing countries gained access to clean drinking water. But the world’s surging population combined with the effects of global warming—extreme drought in some areas, extreme flooding in others—means water scarcity still affects four out of 10 people.

With clean water becoming an increasingly scarce resource, water is more valuable than it’s been in decades. And so are the companies that supply it.

That’s why water stocks have been among the market’s best performers of late. Just look at the returns of these five water stocks and ETFs over the past two years, all of which have either beaten or matched the 45% return in the S&P 500 during that time:

5 Water Stocks and ETFs to Beat the Market
Global Water Resources (GWRS): +65%

Middlesex Water Company (MSEX): +52%

First Trust Water ETF (FIW): +53%

Invesco Water Resources ETF (PHO): +52%

PowerShares Global Water Portfolio ETF (PIO): +45%

Not all water stocks and ETFs have outperformed, of course. But of the 20 or so that I looked at, only a couple were actually down in the last two years.

The two stocks on this list are water utility companies. Global Water Resources is based in Arizona and provides “Total Water Service” that manages “the entire water cycle by owning and operating the water, wastewater and recycled water utilities within the same geographic areas in order to both conserve water and maximize its total economic and social value,” per the company’s website; Middlesex Water Company owns and operates water utility and wastewater systems in New Jersey, Delaware and Pennsylvania, and has raised its dividend for 48 consecutive years. The other three are ETFs whose holdings include some of the top water stocks from around the world.

All of them are growing; the two water stocks on this list are expected to grow revenues by an average of 6% in 2021 despite disruptions to business from the ongoing COVID-19 pandemic. That may not sound like much. But up until a year or two ago, most water companies weren’t growing at all.

Like most utility stocks, both of them pay a dividend. And with a possible market correction looming, utilities are a good hedge against possible impending volatility.

The water crisis is clearly on Wall Street’s radar, and the institutions are investing in the push to solve it. As with the coronavirus, let’s hope it is solved—sooner rather than later.

Until then, you can profit by investing in the companies trying to do the solving.

Do you invest in water stocks? Why or why not?