While crude oil and even gold rank as one of the most important commodities, nothing can beat the fluid that we drink, segueing into water stocks to buy. With hydrocarbons and precious metals, industries are always looking for better and/or cheaper alternatives. However, no alternative for water exists, putting the precious commodity in unique standing.
Understanding that the capital markets move on supply demand fluctuations or imbalances, water stocks to buy offer an excellent proposition for your portfolio. First, the world’s water supply is getting worse. Combined with global population growth, it’s entirely possible that armed conflicts will erupt over the resource. Again, there’s just no other alternative available.
Second, water-focused enterprises are somewhat oddball investments. As a result, they can potentially offer portfolio diversification. While others chase their technology names, you can quietly build a fortune with these compelling water stocks to buy now.
An American utility company, Essential Utilities (NYSE:WTRG) provides drinking water and wastewater treatment infrastructure and services. It happens to be one of the largest publicly traded utilities of its kind in the U.S., thus making WTRG one of the top water stocks to buy. By the numbers, Essential serves approximately five million people across nine states.
Despite the natural relevance, WTRG is off to a rough start in the new year. Since the beginning of January, the equity slipped almost 8%. Over the past 52 weeks, below off parity by nearly 24%. Despite the red ink, Essential still trades at a relatively high earnings multiple of 20X. Nevertheless, this figure is down sharply from the 42X posted in December 2020.
Also, as a positive counterpoint, Essential posts a robust three-year revenue growth rate of 28.3%, above 91% of its peers. As a show of support, analysts since September last year have consistently rated WTRG a buy. The most recent price target comes in at $42, implying just over 20% upside potential.
Mueller Water Products (MWA)
a picture of water
Source: Shutterstock
One of the water stocks to buy that doesn’t quite get as much attention as similar ideas, Mueller Water Products (NYSE:MWA) ranks among the largest manufacturers and distributors of fire hydrants, gate valves, and other water infrastructure products in North America. Per its public profile, the company breaks down into two business units, Mueller Co. and Mueller Technologies. Together, they oversee more than a dozen brands and affiliates.
Fundamentally, because Mueller aligns with the broader water infrastructure market, MWA effectively enjoys permanent relevance. That’s mainly because of the growing population. Through natural births and immigration, the U.S. could continue to see growth until a negative trend materializes in the second half of the century.
Until then, the nation will slowly but steadily expand, translating to increased resource consumption and material usage. Therefore, MWA trades at a lofty 31.42X earnings multiple for a reason. However, you’re also getting solid revenue growth and consistent profitability.
Analysts seemingly agree with the thesis, pegging shares a moderate buy with an $18.25 target. That should be good for a 20% lift, making MWA one of the water stocks to buy.
Veolia (VEOEF)
A zoomed in photo of a drop of water hitting a container of water's surface.
Source: Sambulov Yevgeniy/ShutterStock.com
As a rule of thumb, investors should be careful about buying securities over the counter or the pink sheets as it’s called colloquially. However, Veolia (OTCMKTS:VEOEF) deserves special consideration when it comes to water stocks to buy. A French transnational company, Veolia operates in three main service and utility areas: water management, waste management, and energy services. It features a market capitalization of just under $23 billion so it’s no run-of-the-mill OTC stock.
Thanks to its critical businesses, you could make the argument that Veolia enjoys a permanently steep and wide moat. With utilities, not just any enterprise carries the resources necessary to overcome the financial and regulatory hurdles to be competitive. However, my interest in Veolia focuses on its desalination directive. As one of the key players in converting salt water into potable (drinking) water, Veolia could play a major role in water security.
If you haven’t heard of Veolia, no one can blame you. However, you should consider doing your research now. At the moment, analysts rate shares a unanimous strong buy with a $38.83 average price target.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.
