11-01-2015, 12:40 PM
(10-30-2015, 11:05 PM)crimsonghost747 Wrote:(10-27-2015, 11:20 AM)Roadmap2Retire Wrote: One subsector I recommend looking into are the water utilities - valuations are still a bit stretched, but good to keep them on the watchlist. Top of my list are AWK and WTR.
I am a big fan of water utilities. A lot of people see utilities as almost always electricity related but as we all know that has it's own risks due to us finding better and more efficient means of generating/transporting that electricity. So there is always a risk of new inventions that make the current stuff obsolete faster than expected. That and the current mindset of making everything more and more energy efficient.
With water there are fewer risks. Everyone wants and needs water... that will never change. Nor will the method of transportation... there simply are no smart alternatives, or the need to change away from using pipes. As an added bonus, pretty much always there is just one pipesystem that serves a certain area and that means that companies have a small scale monopoly in these areas.
Both AWK and WTR are really solid picks. In fact WTR is one of my largest holdings. So definitely take a look and put them on your watchlist, however they are both very highly valued at the moment so I wouldn't necessarily jump in right now.
One thing to look out for in water utilities is the capex aspect. When I was browsing through the IR sections of AWK, I came across some metrics and projections which was talking about the age of the pipes and the need to replace them. As I understand, a big part of the infrastructure is very old upgrades will be needed in the coming years. Not a deal breaker, but just something to keep an eye out for...