The Top 5 Water Management Stocks You Should Buy Now

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These companies are addressing water scarcity, managing current resources — and outpacing the market. 

Water is one of the world’s most valuable resources. And in many areas around the globe, it’s becoming harder to come by. 

Some of the companies listed below are helping to address water scarcity. Others design technology that makes producing potable water more efficient. And still others simply manage the current water many of us already have access to. 

In all of these cases, these publicly listed companies are using their available talent, resources, and technology to help alleviate water problems and find long-term solutions. 

For investors looking to tap into (pun intended) water stocks, the five companies below all have some exposure to water management — and all are posting market-beating returns.  

  1. American Water Works 
  2. Xylem Inc. 
  3. Energy Recovery 
  4. Pentair 
  5. Danaher Corp.

American Water Works (NYSE: AWK)

  • American Water Works (NYSE:AWK)
  • Price: $145.05 (as of close May 19, 2022)
  • Market Cap: $26.363B

Water management may not be the most exciting investment segment. But it can be a very lucrative avenue for investors. Case in point is American Water Works, which has seen its share price explode more than 700% since going public in 2008. 

How’s that for a refreshing investment?

Share price performance aside, American Water Works is the leading water utility in the U.S., with facilities spanning across forty-six states and reaching more than 15 million people. 

Environmentally conscious investors will also like that the company has been named one of the top 100 sustainable countries in the U.S. four years in a row, according to Barron’s. It was also the highest-ranked utility on that list for 2021. 

As a regulated utility, investors shouldn’t expect eye-watering growth. But American Water Works is still growing nonetheless. Operating revenue increased 6% and regulated business net income spiked 16% in the first half of 2021. 

In addition to organic customer growth, the company has made fourteen acquisitions across six states in 2021 to further expand its footprint. American Water Works also expects to close on two acquisitions of large water companies by the end of the year. 

Dividend investors will also love American Water Works. Currently, the company pays a dividend yield of about 1.4%.

Xylem Inc. (NYSE: XYL)

  • Xylem (NYSE:XYL)
  • Price: $81.95 (as of close May 19, 2022)
  • Market Cap: $14.759B

According to Xylem, an estimated 1.8 billion people will live in countries with water scarcity problems by 2025. That’s why the company and its water technology systems are so important. 

Xylem says it’s “committed to ‘solving water’ by creating innovative and smart technology solutions to meet the world’s water, wastewater, and energy needs.” To do this, it uses everything from smart aeration and advanced filtration systems to chemical-free disinfection to provide water solutions across 150 countries. 

Xylem’s revenue increased 14% in the first six months of 2021, compared to the same period in 2020. And net income skyrocketed nearly 190%. 

The company recently acknowledged the global chip shortage’s impact on its business. But Xylem’s management still expects full-year 2021 revenue growth between 3% and 4%. It also expects adjusted earnings per share (EPS) to grow roughly 20% from last year. 

Xylem’s unique approach to creating clean water technology solutions across the globe makes it a company you can be proud to invest in. And at the same time, its share price has easily managed to outpace the S&P 500 over the past three years, giving you the potential for market-beating gains. 

Energy Recovery (NASDAQ: ERII)

  • Energy Recovery (NASDAQ:ERII)
  • Price: $18.23 (as of close May 19, 2022)
  • Market Cap: $1.012B

The U.N. estimates that, over the next thirty years, there will be a 30% increase in water demand. Some companies, like Energy Recovery, are looking to help by tapping into one of the Earth’s most abundant resources: salt water. 

But to make salt water drinkable, you have to desalinate it. Traditionally, desalination has been less than environmentally friendly. Many processes require the use of fossil fuels and increase greenhouse gas emissions.

Energy Recovery’s equipment offers a more sustainable option by reducing energy consumption during the desalination process by up to 60%, compared with a typical system. 

Just as impressive? When Energy Recovery’s system is up and running, it gives off zero emissions. 

In fact, the company says that 89% of its total product revenue has been generated from renewable energy and efficiency-related products. And Energy Recovery’s pressure exchange systems have helped other companies avoid 12.4 million metric tons of carbon emissions. 

In the first half of 2021, the company’s financial picture wasn’t exactly rosy. Revenue tumbled. But that drop was due to the planned expiration of a licensing agreement. Investors will be pleased to know that product revenue increased 30% over the same period.  

Even with a rough start to 2021, the Energy Recovery’s been a solid long-term investment. Its share price has risen 155% over the past three years. 

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Pentair (NYSE: PNR) 

  • Pentair (NYSE:PNR)
  • Price: $48.35 (as of close May 19, 2022)
  • Market Cap: $7.997B

Pentair is a global company with a wide-ranging water management product lineup. That includes everything from municipal wastewater and water supply treatment to agricultural irrigation and food production, to residential filtration.

The company’s net sales spiked 27% in the first half of 2021, compared with the first half of 2020. And net income jumped by 80%. 

On the company’s third-quarter earnings call, management said that, while Pentair faces supply-chain difficulties and inflation challenges (like practically every other company right now), it’s still had a very strong year. That includes 25% sales growth year-to-date, 40% earnings per share growth, and expanding margins. 

Finding water stocks that are not only growing but also outpacing the S&P 500’s returns isn’t always easy. But Pentair delivers on both, with its share price climbing 77% over the past three years. 

Danaher Corp. (NYSE: DHR)

  • Danaher (NYSE:DHR)
  • Price: $249.31 (as of close May 19, 2022)
  • Market Cap: $178.48B

Danaher is a globally diversified conglomerate based here in the U.S. It’s not a water management pure play, but investors may be interested in the fact that several of its subsidiaries focus on water management. 

The company says that some of its water management devices “help analyze, treat, and manage the world’s water” for everything from municipal and wastewater treatment plants to natural water resources, including lakes and oceans. 

In fact, the U.S. Geological Survey has used devices from Danaher’s Aquatic Informatics subsidiary since 2005 to manage water data from 16,500 streams, groundwater locations, and other water precipitation sites.

Danaher’s sales jumped 46% in the first six months of 2021, and net earnings spiked 129%, compared with the same period in 2020. And the company’s management said in the third quarter that its water quality revenue segment grew by the mid-single digits.

Danaher has a wide-ranging reach in the water management space. And it’s also been a fantastic investment over the past three years, with its share price climbing more than 190%. 

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Millennial Money is part of The Motley Fool network. Millennial Money has a disclosure policy.

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