The availability of water supply stocks is affected by many factors: global population growth, increasing population density in coastal regions, the efficiency of local infrastructure, global climate change, and regional geographic features.
The scale of application of environmentally complex technologies plays an important role. Incidentally, in the twentieth century, two-thirds of the planet’s forests and wetlands, key elements in maintaining the water balance of habitable areas, were lost.
It is obvious that the value of water will constantly grow because water and clean air cannot be replaced by anything, unlike any other resources. At present, investments in water do not cause difficulties. In fact, both government and private infrastructure companies can be considered.
Table of Contents
What is the benefit of your investment in water resources
In many countries, water companies have gradually moved from the public to the private sector. Some countries prefer to let private companies run the entire network, while others prefer public-private partnerships. Understanding that each country adheres to its own regulatory system is just as important as understanding the investment profile of individual stocks. This makes them particularly suitable for long-term investors and position traders.
Another critical advantage of water companies is their abundant dividends. That’s why investors should always pay close attention to a stock’s dividend policy and calculate the dividend yield to determine if the stock is overvalued.
Also, as the demand for water increases, there are problems with water scarcity, pollution, falling water tables, and flood/drought damage.
In particular, developers of energy-efficient water treatment systems, filtration, pumps, and water systems could benefit. Long-term investors should pay attention to the Chinese market, one of the leading assets of which will be water.
Clean water – “clean” profit
One of the trends in this market segment is desalination. There are many ways to extract salt from water, but reverse osmosis technology is considered the most promising. By 2027, the global market for desalination equipment will reach $25.7 billion, with an average annual growth rate of 9.0%.
The gap between water supply and demand is projected to be 40% in 2030, with global demand for drinking water increasing by 70%.
Budding investors coming to the Gainy team used to consider water stocks separately for investment. Water is not a commodity, but the backbone of the global economy. It ties together all the industries available for you to invest in:
- Agriculture uses the most water – 69% of the world’s resources.
- Industry uses about 21%.
- The energy sector is also a big consumer of water and water supply stocks around the world.
Many companies are involved in seawater desalination, but the corporations that survive and succeed are those that work in several areas at once.
Water supply is a long-term investment
In recent years, the direction of venture capital investment in the development of eco-technologies, including projects related to water supply, has intensified.
The main direction of companies in this market segment concerns the creation of compact, energy-efficient solutions for water and wastewater treatment without the use of chemicals.
Investments in the water sector cover 4 main areas: water management, efficient use of water (purification and reuse) and efficient water consumption, and the relationship with agriculture.
Investment by region
Four indicators of the attractiveness of the region in terms of the development of water supply systems: renewable domestic freshwater resources per capita, the dynamics of renewable domestic freshwater resources, the ratio of consumed and renewable water resources, as well as GDP per capita.
Among the most promising countries for investors to pay attention to are UAE, Qatar, Bahrain, Saudi Arabia, Israel, Jordan, Oman, Yemen, Libya, and Mauritania.
Are the risks high
Despite the value of water as a resource, it tops the list of operational and economic risks. Venture capital is reluctant to invest in this market sector and tends to view the water crisis as a long-term problem.
Investments in water, in his view, are heterogeneous. Sometimes it can be difficult to value water as a commodity.
Venture Capital’s distrust of this market segment has to do with politics. Local governments sometimes manipulate the provision of public services in the run-up to elections. In some areas, officials exchange water services for votes, while in others they cut off the water completely, thus punishing dissenters.
Another difficulty that also often alienates investors is poor water management. According to the latest UN World Water Development Report, water infrastructure around the world is poorly financed.
One reason for the lack of investment in water management is that the service is perceived mainly as a social service, and in some cases, it is seen as an environmental issue, but not as an economic one.
Promising Business Areas
Most “water” companies operate in one or more of the following areas:
- Production of bottled water, its delivery to the end consumer. Quite a fast-growing area, for example, in the USA between 2007 and 2017 the consumption of bottled water increased by 61%.
- The manufacture of metering devices. Leaks are a major concern; metering devices are needed both for the end-user not to overpay and to detect leaks.
- Production of reagents for purification.
- Development of technologies for seawater desalination.
- Development of technologies to assess the condition of infrastructure.
- Maintaining water extraction/delivery/treatment infrastructure.
- Development of software to optimize the consumption of water resources, monitoring their use.
- Development of instruments and technologies to assess the quality of water resources.
- Delivery of ice and water from it. Usually, such water is positioned as premium water.
- There are a lot of options, and businesses operate in each of the above areas. There are many public companies, and their shares are suitable for investment.
As for the potential yield, it can be many times higher than the average yield of the stock market.
Conclusion
Don’t forget the prospect of ever-increasing water consumption as the world’s population grows.
Get a high return on your investment portfolio by paying attention to popular areas of the reliable water stock market. Gainy focuses on income-generating companies engaged in water treatment, water reuse, water delivery to private consumers, businesses, and industry, pipe supply, infrastructure maintenance, wastewater treatment, development of appropriate filters, and other directions.
