10 Stocks That Won't Leave You High and Dry

BOSTON ( TheStreet) -- Most of us don't give our water supply much thought. But "free," or at least endless, supplies of relatively cheap water are evaporating, and the enormity of the problem is growing because of rapid climate change and the threat of global warming.

So water price shocks for companies and consumers aren't far off. That will prompt new ways of managing the resource, which is why the long-term prospects for water-industry companies' stocks, ranging from utilities to manufacturers of pipes, chemicals and computerized controllers are so compelling.

"Much of the U.S. water infrastructure dates back to the Great Depression, and the Environmental Protection Agency estimated in 2007 that it would require about $335 billion to upgrade and repair just community and not-for-profit water systems," writes a Morningstar analyst. "With municipalities struggling to finance basic repairs and federal funding unable to bridge the gap, the signs point to massive opportunities for investor-owned businesses."

Not to mention the international demand for modern drinking- and waste-water infrastructure design, construction and maintenance.

The S&P Global Water Index, made up of 50 stocks, has risen 9.8% this year, versus the S&P 500's 9.4% gain. The water index is up 67% over the past three years, more than three times that of the S&P 500.

Indicative of the size of the need for spending, industry trade group the American Water Works Association estimated in a recent research report that fixing and expanding underground drinking water systems in the U.S. will cost over $1 trillion in the next 25 years.

In the near term, it's expected that big infrastructure spending will be fitful as already cash-strapped local governments face opposition to tax increases. But S&P says it expects water utilities will get "adequate rate hikes to cover rising infrastructure costs for aging water systems."

Inevitably, though, an increasing number of communities will choose to sell their municipal water supply utility to private, professional managers or establish public-private operating partnerships.

That creates opportunities for companies such as American Water Works ( AWK), already the nation's largest private water utility, and water-management specialists such as Xylem ( XYL), which has products that cover the gamut of water industry needs, from transportation to purification.

Here are 10 stocks representative of various aspects of the water industry that are expected to benefit from the changes ahead, arranged in inverse order of market capitalization:

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