NEW YORK (TheStreet) -- I'm a proponent of the notion that water should be viewed as an asset class, appropriate for inclusion in investor's portfolios, but in small amounts.We certainly can't live without water, and in general, potable water is in short supply. It has been estimated that 97.5% of the earth's water supply contains too much salt for human consumption, leaving just 2.5% that is fresh water. But two-thirds of the fresh water is frozen in glaciers and ice caps, so the supply is indeed limited.
PICO's other businesses include distressed residential land in California, a new canola oil operation in Minnesota that is now up and running, and until last week, the ownership of two small insurance companies in "run-off" (meaning that they were not writing new policies, just managing existing ones), which the company recently sold. A more mainstream approach to owning water exposure is via water utilities. Overall, this is a highly fragmented business, with an estimated 52,000 community water systems in the U.S., and there's been a move toward consolidation. There are currently fewer than a dozen publicly traded water utilities and just four with market caps in excess of $500 million. These companies are typically involved in the transmission of water, and are not necessarily asset plays for owned water in the ground. They also feature decent dividend yields. American Water Works ( AWK) is the largest, with a $5.8 billion market cap (3% yield). Aqua America ( WTR) ($3.4 billion market cap, 2.7% yield) has been at the forefront of the consolidation movement, making more than 100 acquisitions in the past seven years. California Water Services ( CWT) ($744 million, 3.5%) and American States Water ( AWR) ($720 million, 2.9%) round out the list of the largest publicly traded water utilities. The simplest way for most investors that desire exposure to water is to take the scattergun approach via exchange-traded funds. PowerShares Water Resources ( PHO)), for instance, owns a portfolio of 29 companies, including water utilities, water treatment companies, pipe and pump makers, and others involved in the industry. There are also a couple of ETFs that include international water exposure in the mix such as the Guggenheim S&P Global Water Index ( CGW) and the PowerShares Global Water Portfolio ( PIO). As a value investor, I prefer to get my exposure to water via individual names, some of which are too small and/or esoteric for a wide audience. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.