Investing in Water Infrastructure

05/03/2017 2:50 am EST

Focus: INDUSTRIALS

Tony Daltorio

Editor, Investors Alley Premium Digest

One problem that will not fade away any time soon is the availability of water that is safe for use and other related issues such as sanitation, asserts Tony Daltorio, editor of Investors Alley Premium Digest.

Globally, the problem is massive. The World Bank says infrastructure spending needs to triple to $114 billion annually. And that is not counting the operating and maintenance costs.

Back here at home, the 2017 report card from the American Society of Civil Engineers (ASCE) gave our wastewater infrastructure a grade of D+ and our drinking water infrastructure a grade of D. These are not grades you would be happy with if your child received these in school.

Add in the fact that the U.S. Office Director of National Intelligence now ranks water scarcity as a major threat to national security alongside terrorism. The ASCE estimates our country needs $105 billion in wastewater funding now. The EPA says $271 billion will be needed over the next 25 years on wastewater spending.

On the drinking water side, the American Water Works Association believes upgrades to our country’s creaking water infrastructure may require an astonishing one trillion dollars!

Overall, the ASCE says there is a more than $2 trillion funding gap between the projected current funding and the $4.59 trillion needed to get U.S. infrastructure up to an overall B grade by 2025.

Even if all of these figures are off by a small margin, the message is clear: the United States needs to begin upgrading its infrastructure now.

The good news is that President Trump is proposing to spend about a trillion dollars on infrastructure. But much of that funding is expected to come from private industry in the form of public-private partnerships.

We probably will not get the details of Trump’s plan until the fall. But investors shouldn’t wait until then. It’s time now to look for infrastructure stocks that will benefit from increased spending in the sector.

There are quite a number of companies involved, even just in the water infrastructure sector.

One such company IPO’d in October is Forterra (FRTA). It is a leading manufacturer of pipe and precast products in the United States. Its products are used for a variety of water-related infrastructure applications including water transmission, distribution, and drainage.

Another similar company is Northwest Pipe Company (NWPX). It’s the largest manufacturer of engineered steel pipes for drinking water systems in North America.

For those readers looking for a broader global play on water, there are four water-related ETFs: First Trust ISE Water Index Fund (FIW), Claymore S&P Global Water Index (CGW), Powershares Water Resource Portfolio (PHO) and Powershares Global Water Portfolio (PIO).

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