Water Market Outlook for 2011 : Steve Maxwell (January/February 2011)

Water Utility Infrastructure Management, a magazine published bi-monthly, contains an article that tracks the performance of publicly traded water stocks. With a chart that listed 20 companies in this segment, Steve Maxwell gave his assessment of the outlook for the year. Optimistically, he noted that for the last year these stocks registered a 12.4 performance index and that that trend should continue. Maxwell cited the difficulties of measuring performance--the volatility of this market--with frequent mergers and acquisitions, resulting in consolidations. Examples of this phenomenon include the purchase of Dionex, "a leading supplier of sophisticated chromatography instrumentation for water analysis in fixed-based labs" (p. 20), by Thermo Fisher Scientific and OI Corp by ITT. ITT has announced that it will spin off its water-related businesses to its shareholders. Maxwell characterized the development: "it will become one of the -- if not the -- largest pure play public industrial water companies in the marketplace. This will be a very welcome addition to our currently "thin" universe of pure-play public water companies--and hopefully ITT will become a bell-wether stock for the overall industry" (pp. 20-21).

The question remains whether to purchase stocks now or wait for a correction, since Maxwell noted that the stocks trade at 80 to 90 percent of their 52-week highs as of late January 2011. Some stocks have not share the gains of other, such as Northwest Pipe, with accounting problems; Energy Recovery, with weak desalination sales; Federal Signal, with anemic profitability; and Mueller Water, from a lack of investor interest. Maxwell's list of stocks follows:

Ameron (AMN)
Badger Meter (BMI)
Calgon Carbon (CCC)
Danaher (DHR)
Dionex (DNEX)
Energy Recovery (ERII)
Federal Signal (FSS)
Franklin Electric (FELE)
Gorman-Rupp (GRC)
Insituform (INSU)
ITT Corp (ITT)
Layne Christensen (LAYN)
Lindsay Manufacturing )LNN)
Mueller Water (MWA)
Nalco (NLC)
Northwest Pipe (NWPX)
Pentair (PNR)
Tetra Tech (TTEK)
URS Corporation (URS)
Watts Water Tech. (WTS)