FIW - FIW: Still Expensive But This Water ETF Is Flowing In The Right Direction
2024-06-07 15:13:50 ET
Summary
- The First Trust Water ETF holds 36 companies that derive a substantial portion of their revenues from the potable water and wastewater industry.
- Over the last two years, I have relied on fundamental analysis to justify not buying FIW. In previous reviews, I've noted issues with FIW's valuation, quality, and earnings momentum.
- FIW has shown improvement on these factors over the last year, and despite it offering solid growth potential, it trades at 23.25x earnings, a rich multiple for the Industrial sector.
- As a result, I've assigned a neutral "hold" rating to FIW, but I believe there could be an excellent buying opportunity in the months ahead if its valuation decreases.
Investment Thesis
I last reviewed the First Trust Water ETF ( FIW ) on July 16, 2023, concluding that the water industry's supply chain challenges and the ETF's high valuation warranted only a "hold" rating. Since that article was published, FIW has lagged behind the Invesco Water Resources ETF ( PHO ) and the SPDR S&P 500 ETF ( SPY ) by 1.44% and 5.56%, respectively....
FIW: Still Expensive, But This Water ETF Is Flowing In The Right Direction