5 Stocks for California's Drought

05/27/2014 7:00 am EST

Focus: STOCKS

These rallying water stocks are up for the quarter, but will the trend continue if droughts persist?, wonders James Dennin on Kapitall.com?

California's water problem isn't going to improve any time soon. Most expect the droughts will continue until El Niño returns this winter and dumps some much-needed rain on the parched Southwest.

Currently only California has done very much about addressing the persistence of water shortages.

Among other things, lawmakers have introduced tiered water pricing, charging more for less-than-necessary water use like lawn maintenance. Los Angeles Country has introduced a "cash for grass" program that would pay people to build more sustainable gardens and the like.

As of now the entire state is on emergency water rationing. And those concerns are starting to spread into Nevada, where advertising campaigns aimed at particularly thirsty residents in the south of the state are urging smarter water use.

Many analysts see water plays as one of the most secular growth plays out there. That's because climate change and population growth have already started to put greater pressure on water tables in a trend that few expect to slacken.

Water utilities, which are expanding their infrastructure to move water from plentiful regions to stressed ones, will benefit most from this trend. We decided to run a screen on water utilities stocks that traded up for the quarter ending in March.

Starting with a list of 20 water stocks, five passed the first screen. Do you think water utilities represent a reliable growth play? Use the list below to begin your analysis.

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Click to Enlarge

1. American Water Works Company, Inc. (AWK): Provides water and wastewater services to residential, commercial, industrial, public, and other customers in the United States and Canada. Market cap at $8.39B, most recent closing price at $46.85. Performance Quarter: 9.12%

2. American States Water Company (AWR): Provides water, electric, and contracted services in the United States. Market cap at $1.09B, most recent closing price at $28.08.
Performance Quarter: 1.93%

3. Cadiz Inc. (CDZI): Develops land and water resources in the United States. Market cap at $126.63M, most recent closing price at $7.83. Performance Quarter: 10.17%

4. Middlesex Water Co. (MSEX): Operates regulated water utility and wastewater systems in New Jersey, Delaware, and Pennsylvania. Market cap at $318.94M, most recent closing price at $19.95. Performance Quarter: 1.11%

5. Companhia de Saneamento Basico do Estado de Sao Paulo (SBS): Provides water and sewage services to residential, commercial, industrial, and governmental customers in the State of Sao Paulo. Market cap at $14.08B, most recent closing price at $10.30. Performance Quarter: 8.41%

Monthly returns sourced from Zacks, quarterly performance sourced from Finviz.

By James Dennin of Kapitall.com

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