Water, unarguably the most precious natural resource in the world is attracting investors who find its longterm scarcity attractive. There has been an increasing concern about the future of fresh water supplies used in a wide variety of applications from farming to bathing. The environment is shaping up favorably for companies involved in water management, treatment, and distribution. I also believe that corporations involved in the manufacturing of the components used to lay down the water supply chain- pipes, brackets, filtration systems, etc. The growing concern for water has even attracted the likes of T. Boone Pickens has been quietly accumulating the rights to water, yes, water in Texas and the Midwest.

Before you read any further I will advise that many water companies have yet to operate profitably since they are growing and investing heavily in their operations. This is an obvious risk that should not be taken lightly; these companies have no free cash flow and post negative EPS for the most part. I would suggest that water ETFs are a better way to take advantage of the favorable operating environment while protecting your portfolio from the risk.

Pickens Loves Water

The most notable investor is T. Boone Pickens, the legendary energy investor who has surprisingly gone green with his interests. Pickens is a proponent of water and has jumped head first into the water management field. The establishment of Mesa Water in 1999 marked the beginning of Pickens’ mass acquisition of water rights in Texas. Texas established a law in the early 1900s that simply stated that “the biggest pump wins.” This meant that one could build a pump and essentially pump water right out of your backyard- the idea that someone could make money off your property did not excite Pickens. After accumulating rights to large amounts of ground water, Pickens strategically found ways to cash in on the imminent scarcity of water in urban Texas. To read in detail about Picken’s water plans, visit Business Week. Investors have followed this trend as water management companies have entered to capitalize on water as related ETFs are making a rise.

Water ETFs

As I stated earlier, water ETFs seem to be the best way to capture the boom in the water commodity/infrastructure market.