Tag Archives: macro-view

Water: Investing In The Future

Summary Water is a scarce commodity. Water scarcity already affects every continent. Around 1.2 billion people, or almost one-fifth of the world’s population, live in areas of physical scarcity. Water Resource Portfolio ETF offers an excellent opportunity to invest in the water industry. Even though water is something which seems normal for the average Joe in a developed country, it is definitely not as normal as it seems . Water is a scarce commodity and an absolute necessity for every living creature on the planet. The United Nations indicate that roughly 1.2 billion people (around 1/5th of the world’s population) live in the areas where there is no physical abundance of water. India for example is faced with the prospect of becoming water scarce by 2025 where demand of water will exceed all the current sources of supply of water. India might seem far away, but closer to home such as in California water scarcity is becoming a serious problem. Businesses will have to treat this precious resource far more carefully in the future. Source : Getty Images (a footbridge spans a completely dry river bed in Porterville, California) One way of investing in water is to invest in the PowerShares Water Resources Portfolio ETF (NYSEARCA: PHO ) , one of the largest water ETFs in the world. This article will cover the fundamental analysis of Water Resource Portfolio. Water ETF: Main holdings Source : etfdb.com The issuer of this ETF is Invesco, a large independent investment management company incorporated in Bermuda. The expense ratio of 0.61% is a reasonable number and not incredible expensive. With 800 million assets under management it’s not a large ETF. They are currently trading 10% under its year high and 3% above its year low. ETF: Main Holdings Source : Invesco The 3 largest holdings are Ecolab (NYSE: ECL ), Pentair (NYSE: PNR ) and First Solar Inc (NASDAQ: FSLR ) which in total hold more than 1/4th of the assets. Ecolab is an American provider of hygiene, energy technologies and water. It’s a firm of considerable size with over 45.000 employees. Ecolab is currently priced only $3 underneath its 52 week high , they recently announced earnings which was roughly in line with expectations. Revenue was $3.4B, a miss of $70M. Pentair is an industrial company headquartered in Manchester delivering a variety of water, fluid and technical solutions. The firm is a bit smaller in contrast to Ecolab with revenue of around $7 billion. First Solar is an American Photovoltaic manufacturer of solar panels and supporting services which include end-of-life panel recycling. First Solar is currently trading at P/E of around 20, almost $30 dollars below its 52wk high. It has been beaten quite significantly lately. Nevertheless, corporate earnings will be announced on the 4th of August and based on a recent well informed article published on Seeking Alpha by Nir Nabar, I’m expecting a rebound. ETF: Fund Characteristics Source: Invesco It’s important to realize that the ETF does not come at a massive discount. At a P/E of over 30, it is not cheap. Yet the share price has sharply dropped over the last few weeks presenting itself as a buy. Source : Ycharts Conclusion Water is an incredibly important commodity. As it’s scarce, business can’t do without proper water management. In today’s society there are plenty of solid water management firms. This ETF provides an excellent opportunity to invest in the business flow of water related businesses: from management, production to filtering of water, this ETF has a solid mixture between small and large cap related firms. With one of its largest holdings close to a 52wk low and it will publish earnings soon, I’m expecting a rebound in this ETF. Water remains an investment in the future. PHO is a buy. Disclosure: I am/we are long PHO. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Mutual Fund Investors Take Wait-And-See Approach Ahead Of FOMC Meeting

By Tom Roseen Despite the flight to safety and what many market pundits might have expected-a subsequent uptick in flows to money market funds, for the second week in three investors were net redeemers of fund assets (including those of conventional funds and exchange-traded funds [ETFs]), withdrawing a net $6.2 billion for the fund-flows week ended, Wednesday, July 29. Investors pulled money out of all four of Lipper’s major macro-groups, redeeming $3.5 billion from taxable bond funds, $1.8 billion from equity funds, $0.9 billion from money market funds, and $73 million from municipal bond funds. Weak earnings reports from bellwether stocks such as American Express (NYSE: AXP ), Caterpillar (NYSE: CAT ), and 3M (NYSE: MMM ), accompanied by a hangover from China’s market meltdown, outweighed a drop in weekly applications for unemployment benefits to the lowest level since 1973. Investors shrugged off a better-than-expected earnings report from Amazon and ignored the Anthem (NYSE: ANTM )-Cigna (NYSE: CI ) M&A news and the announcement that Greek officials had approved a second set of austerity measures. Instead, investors focused on the continued decline in oil, the selloff in commodities, concerns over a decline in global economic growth, and a housing report that showed the largest slowdown in single-family-home sales in seven months. Ho-hum economic data and sketchy guidance from U.S. firms during the flows week initially led investors to safe-haven plays, especially after the Shanghai Composite’s largest one-day slide (-8.5%) since February 2007. Despite a better-than-expected June durable goods report, investors took a wait-and-see approach ahead of the two-day Federal Open Market Committee meeting, leading to a small rally in U.S. Treasuries. However, in the last two days of the flows week U.S. stocks rallied after China stocks showed a more tempered decline and oil prices rose for the first time in five sessions. On Wednesday, July 29, the Dow marked its fifth straight session of triple-digit moves, this time to the upside after the Federal Reserve left itself wiggle room to raise rates as early as September, citing a continuation of solid gains in the job market. Investors cheered Citrix’s better-than-expected earnings report, Chinese stocks moved higher, and crude oil had its second biggest one-day gain for July, with futures rising 1.7% for the day. Nonetheless, the Dow Jones Industrial Daily Reinvested Average still finished the flows week down 0.56%. (click to enlarge) Source: Lipper, a Thomson Reuters company Interestingly, fund investors collectively kept their foot on the gas pedal for a few risk-on plays, injecting net new money into international equity funds (+$0.9 billion), health/biotechnology funds (+$0.6 billion), mid-cap funds (+$0.2 billion), and science & technology funds (+$0.1 billion). Except for small net flows into government/Treasury funds (+$0.4 billion) during the week, the typical safe-haven plays didn’t attract net new money as investors appeared to be waiting on the policy statement by the Fed to plan their next steps. Year to date, international equity funds (including traditional funds and ETFs) have attracted $135.1 billion of net new money, while their domestic equity counterparts have suffered net redemptions to the tune of $54.7 billion.