On April 15th, 2007, MarketMatador.com published a detailed article about the “impending water crisis.” We’ve decided to republish the article in an effort to better educate both investors and consumers. Please understand that some prices, P/Es, and quotes may be dated.

About 70 percent of the Earth is made up of water. 2 percent of that water is “fresh water,” of which 1.6% is locked in the polar ice caps. In other words, only a small percentage of Earth’s water can be used by humans. Even more disturbing, 1 billion of today’s population doesn’t have clean drinking water. The lack of clean water is also a leading cause of diseases today. In Iraq, the United Nations is reporting that the decrease in proper drinking water is leading to an increase death rate in children from diarrhea. In 40 years, India will have outstripped the available drinking water from the country. Investors have the opportunity to make money, and at the same time, make an incredible difference to the world around them.

There are a number of water resource companies currently traded on the NYSE and NASDAQ stock exchanges. Even more numerous are the number of different industries and plays in the water sector as a whole. Watts Water Technologies (WTS) designs, manufactures and markets an extensive line of valves for plumbing, heating and water quality markets. The stock trades at a relatively down-to-earth P/E of 17.2. Watts currently has operations in North America, Europe, Asia and Africa. Franklin Electric Co. (FELE) trades at a slightly higher P/E of 18.4. Franklin manufactures and designs motors, electronic controls and related parts and equipment. Ultimately, those parts are used in the construction and usage of water transportation. Agilent Technologies (A) is the maker of water testing and bioscience materials. Agilent is responsible for a reasonable amount of testing and proper purification of water supplies. The company trades at a P/E of 21.5 and seems to be a bit pricey as of right now.

Investors most difficult decision is, “which one?” Which water related company will return the most, while also helping the current crisis? A decision doesn’t need to be made, and even better, investors can make a safer, more conservative play.

AMEX traded, PowerShares Water Resources Portfolio (PHO) is the best play for the entire sector. It’s top ten holdings are: Watts Water Technologies, Cia de Saneamento Basico, United Utilities, Layne Christensen Company, Franklin Electric Company, Insituform Technologies, Nalco Holdings Company, Mueller Water Products, and Agilent Technologies. As with any ETF, the portfolio offers comprehensive coverage of the complex water sector.

Currently trading at around $19.00 a share, the index seeks to identify a group of companies that focus on the provision of potable water, the treatment of water, and the technology and service that are directly related to water consumption. The index has returned about 26.3% since inception in late 2005. Because of the nature of indexes, funds, and in general, ETFs, buying in can be a much easier task. At these levels around $19.00, investors can safely make a purchase in the index. Usually, the ETF trades at a rather nonvolatile level throughout the trading day, which ultimately may solve the issues that may arise in the water industry as a whole.

Disclosure: No conflicts.