The water theme is simple to grasp:
- Demand: Demand for water has grown at twice the rate of the population, according to the World Resources Institute.
- Supply: Only 3% of the world's water is drinkable.
- Spending: Many Third World countries that previously have had trouble accessing good drinking water are making huge strides in modernizing their water infrastructure.
With those large forces in play, I believe there's plenty of room for another investment product. Claymore just brought public a new water ETF on Monday that mimics the S&P Global Water Index, which is vastly different from the Palisades Water Index that underlies PHO.
The Claymore S&P Global Water Index ETF (CGW) has more of a global focus, with 72% of the fund invested in foreign stocks, as opposed to PHO's 15%. In fact, CGW invests in equities hailing from 14 different countries.Suez (SZE) and Veolia (VE) are CGW's two largest components, accounting for more than 9% each. That makes France the second-largest country by weighting in the fund at 19.58%. The U.S. is the largest country in the fund, accounting for 28%, but the U.S. does not dominate the fund as with PHO; the largest U.S. holding accounts for only 4% of the fund. CGW seems more directly focused on the third investment theme I outlined above, of bringing potable water to places that don't have enough, or any. Both Suez and Veolia are unambiguously water companies. Not so for PHO. Its largest holding, Valmont Industries (VMI - Get Report) has exposure to the water market only through its irrigation segment, which is just one of many business units in the company and provides equipment for watering crops -- not exactly a "drinking water" concept.