New ETF Makes a Big Splash in Water
According to the World Resources Institute, global water consumption grew at twice the rate of the population during the 20th century.
Hydrogen Ventures estimates that $660 billion will be needed for water infrastructure in the next 20 years.
There's a variety of companies seeking to capitalize on this potentially lucrative water theme, from $376 billion market-cap behemoths like General Electric (GE) to $290 million micro-caps like Layne Christensen (LAYN). The challenge for investors is that GE's water business is a long way from having a meaningful impact on the entire company, and one little misstep from a micro-cap like Layne could result in a major blowup.
Seeing the potential for the water sector, PowerShares has contracted to create the PowerShares Water Resources Portfolio (PHO), a new exchange-traded fund that is based on the Palisades Water Index (ZWI). PHO is scheduled to list and begin trading on the American Stock Exchange on Dec. 6 (today).
To evaluate this ETF, I plugged its components into Morningstar's portfolio tracker. PHO has a median market cap of $1.6 billion, which isn't that surprising given that 40% of the fund is small-cap growth and 24% is small-cap value. Earnings for the inaugural version of the portfolio are expected to grow 12% faster than the S&P 500.PHO does have a few mega-cap conglomerates in the mix, including GE, 3M (MMM) and Siemens (SI), but those three have only 0.80% respective weightings. PHO is heaviest in the industrial sector, 49%, and utilities, 33%. Morningstar places the portfolio's yield at 1.5%, and PowerShares has capped the expense at 0.60%, which implies a yield of 0.90%. However, this is my calculation only, and PowerShares has not announced a dividend.
|Palisades Water Index (ZWI) and iShares Russell 2000 (IWM)
|Source: Your Source Financial|
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV