California Drought and Water ETFs

An interesting investment opportunity has recently emerged in an otherwise overlooked sector - water. California is currently in the midst of a four-year drought that has taken is supply of water down to one year according to NASA. With a population of 39 million people and holding the title of the largest farming state in the country, California is in a state of emergency. Consider the state produces more food from farming than Iowa, Nebraska, and Minnesota combined. This is not just a California problem, due to the size of the states economy the ramifications will be felt around the country. Everything from higher almond prices to the potential loss of jobs is possible. That being said, there is almost always an investment angle when a crisis occurs and this time is no different. An investor could consider purchasing individual stocks that manufacture and produce water conservation technologies. But there is a broader approach to the water sector that includes several related ETFs. Highlighted below are three water ETFs that have been and will continue to be affected by the drought in California. The PowerShares Water Resources Portfolio ETF PHO is made up of 28 companies across nine sectors that create products designed to conserve and purify water for homes, businesses and industries. The top weighted sub-sectors include machinery at 48 percent and water Utilities at 18 percent. The top individual holding include Waters Corp WAT at 8.4 percent, Roper Industries Inc ROP making up 8.3 percent, and Pall Corp PLL coming in at 7.8 percent. PHO is down 7 percent over the last 12 months, up 3 percent over the last six months, and down 3 percent year to date. The water ETF has an expense ratio of 0.61 percent. The PowerShares Global Water Portfolio ETF PIO provides investors exposure to 35 companies across five sectors and ten countries. The United States at 40 percent and the United Kingdom at 21 percent are the top weighted countries. Industrials at 52 percent and utilities at 39 percent make up the majority of the portfolio. The top holdings include Geberit AG with an 8.5 percent holding, ROP making up 8.2 percent, and Veolia Environment SA coming in at 7.9 percent. PIO is down 5 percent over the last 12 months, up 5 percent over the last sox months, and up 2 percent year to date. The ETF has an expense ratio of 0.82 percent. The First Trist Water Index Fund FIW consists of 37 companies across six sectors within the potable and wastewater industry. The top individual holdings include Badger Meter Inc BMI at 4.4 percent, Pentair PLC PNR making up 4.2 percent, and California Water Service Group CWT totaling 4.2 percent as well. FIW is down 8 percent over the last 12 months, up 2 percent over the last six months and down 5 percent year to date. The water ETF has an expense ratio of 0.60 percent.