California's Drought Turns Traders' Attention To Water Plays

California is suffering through a four-year drought that has cost farmers nearly $3 billion, sped up the decline of the state's beloved Joshua trees and shed light on residents' lack of conservation practices.

However, some investors are using the state's worsening condition to beef up their portfolios by pouring money into firms aiming to ease California's pain.

Water Conservation Technology

Fund managers have shifted large percentages of their portfolios into companies making technology that will assist with cutbacks on water usage. Roper Technologies Inc ROP, which makes equipment that checks for leaks and measures water flow has seen a 13 percent increase this year, and funds at big name firms like T. Rowe Price and Janus have taken note and bought shares.

Water meters have become a staple in many communities trying to reduce their usage, so companies like Mueller Water Products, Inc. MWA and Badger Meter, Inc. BMI are getting a closer look from traders.

Related Link: California Drought Stocks To Look At

Desalination

The drought in California has forced policymakers to look into new ways to provide fresh water to the growing population. Desalination, which has been criticized in the past for being too expensive and environmentally unfriendly is gaining momentum as the lack of water in California persists.

Companies like Xylem Inc XYL, which make desalination plant equipment, could see benefits in the coming years as the process improves and is seen as a viable way to avoid long-term droughts.

When Will It End

The water issues in California are still a major problem, but most expect that the state will eventually get back on track as public awareness about conservation spreads; but that doesn't mean that water technology will be on the outs.

UK-based researcher Global Water Intelligence said it sees water technology becoming a $25 billion industry over the next three years, as water scarcity persists across the globe.