Three Clear Plays on Water Purification

The PowerShares Global Water Portfolio(PIO) is up 9% since it debuted on June 13. With a month's less lead time, it has attracted just $85.5 million in assets, and average daily trading volume is about 194,000 shares.

Of the 18 non-U.S. markets represented in the PowerShares ETF, Japan has the largest allocation at 11%. Nine of the other countries are in Western Europe, and after Canada a group of emerging markets such as South Korea, Brazil, Malaysia and Chile rounding out the list. The ETF tracks an index of 37 stocks that weights constituents more or less equally and is rebalanced quarterly.

PowerShares Global Water and Claymore S&P Global Water both are made up companies from six sectors: water utilities, which provide water to end users; water-treatment companies; infrastructure companies, which make pipes, pumps and valves and build distribution systems for transporting water; analytical companies, which measure and monitor water conditions; resource-management companies, such as engineering and construction firms, which work with municipalities for the comprehensive management of water resources; and businesses that receive less than 50% of their revenue from water.

While there is some crossover between their individual holdings, Claymore focuses on bigger companies, with 44% of its portfolio in large-capitalization stocks, 45% in mid-caps and just 11% in small-caps. The ratio is almost the reverse for PowerShares, with 48.6% in small-caps, 41% in mid-caps and 10% in large-cap. The expenses of the two funds are not far apart, with PowerShares charging 0.75% of assets and Claymore charging 0.65%.

Both funds hold many of the same stocks, even if Claymore's holdings are more concentrated. French water utility Veolia Environnement(VE) is the biggest holding of the Claymore ETF, accounting for 9.7% of assets; it also accounts for 3.8% of the PowerShares portfolio. Claymore's second-biggest holding is another French utility, Suez(SZE), which comprises 9.3% of assets; it accounts for 1% of the PowerShares fund.

PowerShares biggest holding is Valmont Industries(VMI), at 4.4% of assets.

Other stocks held by both funds include ITT (ITT), an engineering firm based in White Plains, N.Y.; Danaher(DHR) a Washington, D.C., maker of tools for analysis and other materials for the water industry; and Nalco Holdings,(NLC), a provider of water-treatment services based in Naperville, Ill.

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