FIW - PHO: Drinking Water Is Bullish

2023-12-15 17:16:32 ET

Summary

• Invesco Water Resources ETF offers investors exposure to companies operating within the water resources industry.
• The PHO ETF's holdings span various sectors within the water industry, providing exposure to both utility companies and technology-driven solutions.
• PHO stands out among similar ETFs in terms of its diverse portfolio and strategic allocation.

Believe it or not, there's a case to be made in investing in water. Strange concept? Say that to the bulls who invest in the Invesco Water Resources ETF ( PHO ). I like this exchange-traded fund and theme long-term, and think it's worth considering a small allocation into.

PHO offers investors exposure to companies operating within the water resources industry. This includes companies related to water infrastructure, technology, treatment, and distribution. It's a diversified portfolio that encapsulates various facets of the water industry, providing investors with participatory potential in the growth of the global water industry.

The fund's holdings span various sectors within the water industry, with the most significant allocation dedicated to Machinery, followed by Water Utilities and Building Products. It's designed to capture the diverse aspects of the water resources industry, offering investors exposure to both utility companies and technology-driven solutions.

Delving into the ETF Holdings

PHO holds about 40 water-related stocks, but the fund's holdings aren't confined to the water industry alone. The top individual positions in the fund include:

1. Danaher Corporation ( DHR ) : Primarily a healthcare and life sciences company, DHR does have business segments related to clean water, making it the fund's top holding.
2. Roper Technologies, Inc. ( ROP ) : ROP develops and sells diagnostic and laboratory information management products to several industries, including the water industry.
3. Ecolab Inc. ( ECL ) : Though not exclusively a water company, Ecolab, the fund's third-largest holding, provides some water-related products and services.
4. Ferguson plc ( FERG ) : Essentially a plumbing company, it is the top holding in the fund.
5. American Water Works Company, Inc.( AWK ) : It is the fifth largest holding and the first purely water company in the list.

These holdings illustrate that this water ETF provides more than just utility-side exposure—it gives investors access to a wide spectrum of the industry.

Sector Composition and Weightings

PHO's portfolio allocation is designed to capture the diverse aspects of the water resources industry. The largest allocation is dedicated to the Machinery sector, followed by Water Utilities. The diverse allocation within PHO's portfolio assists in capturing the diverse aspects of the water resources industry. It provides investors with exposure to both utility companies and technology-driven solutions, contributing to the growth potential of the global water industry.

Peer Comparison

When compared to similar ETFs in the market, such as the Invesco S&P Global Water Index ETF ( CGW ) and the First Trust Water ETF ( FIW ), PHO stands out in terms of its diverse portfolio and strategic allocation. While CGW and FIW also offer exposure to the water industry, PHO's focus on a wider spectrum of related industries sets it apart.

Pros and Cons of Investing in PHO

Like any investment, investing in PHO comes with its own set of advantages and drawbacks.

Pros :

1. Diverse Exposure: PHO offers investors exposure to a wide array of companies operating within and related to the water industry.
2. Growth Potential: With factors like population growth, urbanization, increasing water scarcity, and the need for improved water infrastructure driving the growth of the global water industry, PHO presents significant growth potential.

Cons :

1. High Valuation: Many of the holdings in PHO are trading at relatively high valuations, which could be a risk factor.
2. Regulatory Factors: Investing in the water resources sector comes with its own set of considerations, including regulatory factors and infrastructure challenges.

Conclusion: To Invest or Not to Invest?

Investing in Invesco Water Resources ETF can be a strategic move for investors looking to diversify their portfolio and gain exposure to the water resources industry. The diverse exposure and growth potential it offers could make it a worthwhile investment. PHO seems to be a good fund for a good theme and is worth a consideration for investors seeking exposure to the water resources industry.

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