Top 10 Water Stocks to Quench a Thirst

A pure play in the water purification sector is Calgon Carbon(CCC Quote), whose products are used to remove organic compounds from water, air and various liquids. The company is ramping up its profitability, with analysts expecting the company to go from losing money last year to earnings of 16 cents a share this year and 30 cents a share in 2008.

While Calgon Carbon seems interesting, I prefer some of the larger-cap companies where water purification services are almost a byproduct of the other services they provide. As urban populations around the world increase and the demand for potable water outstrips the supply of services offered to clean that water, I believe these global mega-caps will be in the best position to dominate the industry.

For instance, a company that normally provides its services to the oil and gas industry, but has also developed an expertise in water treatment, is Jacobs Engineering(JEC Quote). This engineering and construction company has a subsidiary devoted to providing the project management, engineering and materials for making potable water available to areas in need. Because of its exposure to the oil and gas industry, Jacobs counts top hedge fund manager T. Boone Pickens among its investors.

Jacobs' earnings are expected to go from $1.61 per share in 2006 to $2.22 per share in 2007 to $2.57 per share in 2008, giving it a forward P/E of slightly above 20 and solid double-digit growth each year. And the company has beaten analyst estimates for the past four straight quarters.