While mining for gold or cryptocurrencies offer a sexier path to profits, at a basic level, nothing beats the permanent narrative underlying water stocks. As great as cryptos are, who the heck knows if decentralized digital assets will be the new monetary standard? And while gold is universally considered as a store of wealth, wealth itself is a human construct.
But water? I don’t care how many progressive sociological studies you take – it’s a fundamental reality. We need it. The planet can’t survive without it. To be sure, the top water stocks may not be guaranteed to stick around as a going concern. However, the underlying resource is permanently relevant. What’s more, outside headwinds such as climate change may simultaneously increase demand for water while also shrinking water supplies.
Yeah, it’s a cynical take. But that’s the harsh reality, as I stated earlier. You can argue or you can align your portfolio profitability. If you choose the latter, below are compelling ideas for the best water stocks to buy.
Xylem (XYL)
A large water technology provider, Xylem (NYSE:XYL) provides a critical role for public utilities. As well, its services cover residential, commercial, agricultural, and industrial needs. Per its public profile, Xylem’s offerings are divided into two areas: water infrastructure (i.e. clean water delivery and wastewater management) and applied water, which provide water services to various end users.
Fundamentally, XYL ranks among the top water stocks because of its utilitarian technologies. It provides pumping, treatment and other waste management solutions across various applications. In terms of hard data, Fortune Business Insights notes that the global water and wastewater treatment market size reached a valuation of $301.77 billion in 2022. By 2030, the sector could hit $536.41 billion, implying a compound annual growth rate (CAGR) of 7.5%.
Financially, XYL is a bit pricey. Right now, shares trade at 46.85X trailing-year earnings, above the sector median 22.92X. However, it’s consistently profitable. Also, shares have been flying recently. Analysts really dig XYL as a consensus strong buy with a $122.56 average price target. It’s a solid idea with which to kick off this list of best water stocks.
Veolia Environnement (VEOEF)
Adding a little bit of risk to the narrative of top water stocks, adventurous investors may want to consider Veolia Environnement (OTCMKTS:VEOEF). Based in France, the water management and energy services firm might not be a household name stateside. Also, VEOEF – as you can see from its funky ticker – trades over the counter. Still, it posts a roughly 20% return for 2023.
Now, I’m not here to focus on statistics that can easily gyrate day to day. Rather, Veolia intrigues because it specializes in desalination systems. Essentially, the process involves taking salt water and converting it to potable (drinkable) water. It’s almost like modern day alchemy except that as technologies improve, it may provide a pivotal solution to water shortages.
Plus, the global water desalination equipment market size clocked in at $15.53 billion in 2022. According to Grand View Research, this sector could expand at a CAGR of 9.4% from 2023 to 2030. At the culmination point, the industry could be worth $31.7 billion.
I like VEOEF as one of the best water stocks because it’s well positioned for growth in this exciting sphere. Analysts agree, pegging shares a moderate buy with a $35.52 price target.
Essential Utilities (WTRG)
Based in Pennsylvania, Essential Utilities (NYSE:WTRG) is a utility firm with stakes across multiple states, particularly in the Midwest. Per its public profile, Essential provides drinking water and wastewater treatment infrastructure and services. In the spirit of full disclosure, WTRG ranks among the riskiest water stocks. As of this writing, WTRG is on track to lose about 22% of equity value in 2023.
That said, it’s been on a run, moving up over 6% in the trailing month. It’s not surprising that the bulls decided to wake up. While WTRG and its ilk are rather boring, they can bank on the narrative of permanent relevance. Looking at the data, Fortune Business Insights notes that the U.S. water and wastewater treatment market size reached a valuation of $106.18 billion in 2022.
Even better, analysts project that the segment can expand at a CAGR of 6.8% from 2023 to 2030. At the culmination point, the industry could see a value of $106.18 billion. With Essential grabbing a piece of the pie, WTRG could swing higher. Sure enough, that’s what analysts believe, rating shares a unanimous strong buy with a $45 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.