The top five holdings of this water ETF are: Danaher Corp. (DHR, 4.11% of assets); IDEXX Laboratories (4.1%); American Water Works (AWK, 4.09%); Agilent Technologies (A, 4.05%) and Roper Technologies (ROP, 4.05%)
First Trust Water ETF (FIW)
From The Periscope Report
First Trust Water ETF (FIW) is an exchange-traded fund that seeks investment results that correspond directly to the price and yield of an equity index called the ISE Water Index. The fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the index. The index is a modified market-capitalization weighted portfolio of 36 public companies that derive a substantial portion of their revenues from the potable and wastewater industries which are generally industrial and utilities companies.
The maximum market cap in the ISE Water Index is $53.84 billion, the minimum market cap is $215 million, and the median is $2.35 billion. The annual management fees for the fund average 0.57%. The portfolio turnover averages just 17% per year, which helps keeps expenses low.
Over the last five years, the return on the NAV of the fund has averaged 13.7% per year.
In terms of industry concentration within FIW:
• Industrials are 52.4%
• Utilities are 19.2%
• Health Care is 12.3%
• Materials are 9.8%
• Information Technology is 5.0%
• Financials are 1.3%
We have followed Agilent, Danaher, and Roper for nearly 30 years and they are all on our Top Ten list of large cap companies. This is a portfolio we know very well. Plus, we have been researching water technology for 35 years and it is an industry we feel passionate about. To be succinct, potable (drinkable) water is scare and the demand for water exceeds supply.
According to the United Nations, water use has grown at more than twice the rate of population increase in the last century. By 2025, an estimated 1.8 billion people will live in areas plagued by water scarcity, with two-thirds of the world’s population living in water-stressed regions as a result of use, growth, and climate change. According to a recent Bank of America Merrill Lynch Global Research report, when it comes to global drinking water supplies, a “perfect storm” is approaching. Water scarcity is a pressing people and planet issue, noting that 768 million people around the world have no access to clean drinking water and 2.5 billion are without proper sanitation.
The report also projects that half of the world’s population will be dealing with “water stress” conditions, defined as when the available amount of water is exceeded by demand, by 2030. And by 2050, 45% of projected GDP could be at risk, with as many as 50 nations expected to be involved in conflicts over water.
Water shortages and scarcity are already a major issue in the U.S. The ongoing drought in California is affecting food prices across the country. Meanwhile, the state is planning a series of costly and controversial water desalination plants along its coastline.
In our opinion, there will be major conflicts (wars) over water within 20 years. Obviously, the need for water is paramount for human survival. That means companies like Roper and Danaher have to create technology that creates and moves potable water. We can’t think of a better reason to invest in something than the need for water.
Tom Byrne, The Periscope Report, t2byrne@gmail.com, 4025 Sunset Ridge Drive, Canyon Ferry Crossing, Helena, MT 59602, 406-465-4663, January 2017