Summary: A common New Year's resolution is "Dry January". For those who want to go ahead and make 'water' part of the portfolio, Hans Oudshoorn makes a suggestion about how to invest in this theme.
A common resolution for the new year is to drink less alcohol. I myself have done it several times, but some of my friends always participate in "Dry January" and leave alcohol completely behind for a month. Without intending to be moralistic, drinking less beer or wine whilst drinking more water is often seen to benefit your health.
We don't think about it every day when we run the tap, but water is (perhaps) the most scarce 'good' in our lives. All life on Earth depends on water. It is a primary necessity of life for humans, animals and crops. The interesting thing is that as an investor in the stock market, you can also quench your financial thirst with water, hence in this article I consider an opportunity for investing in the space.
Water covers about 71% of the Earth's surface. The overview below shows that of all that water, about 97.5% is salty (seas, oceans and salt lakes) and only 2.5% is fresh. Not all fresh water is equally accessible; only a small part is surface water (1.2%), a large part is groundwater (30.1%) and an even larger part is frozen (68.7%). This frozen section, from glaciers to ice caps, cannot be used directly for humans, animals, crops or production processes. For the aforementioned and more data about water, you can review this source from the Water Science School.
The scarcity of water – and clean water in particular – is also apparent from a study published by the World Health Organization (WHO) in 2019. Worldwide, 785 million people do not have access to clean water and 2 billion people use water contaminated with feces, which leads to around 800,000 deaths per year.
In the same study, the WHO states that by 2025, half of the population will live in a 'water stressed area'. Either an area where the demand for water exceeds the amount available for a period of time, or where poor water quality limits its use. The industry sector is an important factor here - many production processes require (fresh) water and that puts pressure on the available amount of (clean) drinking water. Water consumption for industry also makes up about 20% of total water demand worldwide.
The changing climate has a clear relationship with water. In recent years, we are increasingly confronted with extremes. From prolonged heat and drought, to floods and landslides, this leads to a lack or abundance of water, resulting in food shortages and/or severe problems.
In short, there is plenty to do and read about water, and perhaps because of its scarcity, 'water' as a theme can also offer opportunities for investors.
Those who delve deeper into the theme of water will find companies that are involved in water distribution and management, purification, demand efficiency and issues relating to water and food. There's enough variety for those who are interested in individual shares, but there are also diversified choices.
For an international diversification investment, the iShares Global Water UCITS ETF (ISIN: IE00B1TXK627 ) can be found on the German stock exchange with the ticker 'IH2O'. The fund physically invests in global equities in the 'water' sector and currently has 50 stocks in its portfolio. The ongoing charges are approximately 0.65% per annum and the fund scores five stars via Morningstar.
Notably, the fund also has a Morningstar Analyst Rating™ of Silver, investing in equities that score well on sustainable business practices and have a smaller CO2 footprint than their peers. Overall, the fund scores three globes for the Morningstar Sustainability Rating™. The dividend yield is between 0.75% and 1.5% on an annualized basis and is generally paid semi-annually in May and November.
The main risks? There is currency risk - as mentioned, the fund is denominated in euros, but there are many foreign companies within it. Of course, you also run market risk. When financial markets are under pressure, water related stocks will experience that pressure too. In a nutshell, the fund would be interesting for long-term investors who can and want to bear equity risk and who want to 'quench their financial thirst in the stock market' with part of their portfolio. Click here for more information about the iShares ETF.
Please remember that investing involves risk, historical performance is not a guarantee of future of returns and your investments may lose value.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
