In this article, we will take a detailed look at the 10 Best Water Stocks to Buy According to Hedge Funds.
The water business in the USA is a diverse sector that includes various activities necessary for the development of urban and rural communities. Public utilities are the backbone of this industry – hundreds of public services offer ordinary, everyday water supply and wastewater treatment services to millions of homes and businesses. Such organizations provide the source, treatment, and distribution of potable water, in addition to wastewater collection and treatment to meet environmental standards. Beyond the realm of public utilities, the water industry includes private companies whose expertise is focused on water infrastructure engineering, consulting, and construction. These companies often collaborate with government agencies to modernize aging water systems and implement sustainable solutions, meaning that a significant portion of the water management market is financed from public budgets. They also provide cutting-edge technologies for water purification, desalination, and leak detection, which play a crucial role in improving the efficiency and reliability of water systems.
Several trends and tailwinds are currently shaping the water business in the USA and the rest of the world. One of the most significant trends is the increasing focus on sustainable water management practices due to growing concerns about water scarcity and climate change. Smart water grids and modern metering infrastructure are some of the inventive interventions being implemented to help make water use more efficient and also cut losses. The emergence of digital technologies such as IoT and AI is disrupting the status quo, providing new ways for water utilities to monitor and manage their operations, allowing for real-time data collection and analysis followed by predictive maintenance – this will not only help make water consumption more sustainable, but may also provide significant opportunities for profitability expansion by cutting some operational costs. Another significant trend is the rising investment in water infrastructure, fueled by government initiatives and public-private partnerships aimed at upgrading aging water systems and expanding access to clean water.
From an investment perspective, the future of the water business in the USA looks bright, with several factors contributing to its potential growth. First, there’s an increasing demand for clean and safe water, which is primarily driven by population growth and urbanization. This issue presents substantial opportunities for water treatment companies and distributors. Moreover, the increasing awareness and focus on the environmental and sustainability aspect of the operations, primarily caused by regulatory requirements, are likely to fuel demand for innovative water management solutions and sustainable practices. Investors are particularly interested in the water solutions sector due to its incredible resiliency during recessionary periods; as many water-related projects are sponsored by public budgets, companies exposed to water operations usually have a low equity beta, meaning that they are likely to outperform the broad market during bearish periods. This feature is particularly attractive during stock market peaks – the US equity market is currently near its all-time highs, all while the actions of the new Trump 2.0 regime are starting to cause cracks in the outlook of businesses and consumers. With many surveys and intelligence agencies reporting a sentiment change towards more pessimistic scenarios, as well as significant cuts in the outlook for capital spending by private entities, water-related businesses may become more favored in the eyes of the “smart money”. In view of this, we will take a look at some of the best water stocks to buy now.
An aerial view of a water treatment plant, emphasizing the use of reverse osmosis technology.
Our Methodology
We used the Insider Monkey proprietary hedge fund holding database and identified the 10 most popular water companies, ranked by the number of hedge funds which own the stock.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Xylem Inc. (NYSE:XYL)
Number of Hedge Fund Holders: 32
Xylem Inc. (NYSE:XYL) is a leading global water technology company, with operations in over 150 countries, that provides innovative solutions for the transport, treatment, testing and efficient use of water by municipal, industrial, commercial and agricultural clients. The company specializes in water infrastructure, applied water systems, and measurement & control solutions, offering products such as pumps, filtration systems, smart metering, and advanced analytics. With a strong focus on sustainability and water conservation, XYL is deeply embedded in the global water business, addressing critical challenges such as water scarcity, wastewater management and climate resilience.
Xylem Inc. (NYSE:XYL) delivered record-breaking performance in 2024 with revenue growing 6%, EBITDA margins expanding 170 basis points, and double-digit EPS growth. The company demonstrated strong execution with Q4 orders growth across all segments at mid-single digits or better, providing momentum into 2025. The integration of Evoqua is progressing ahead of schedule, delivering cost synergies significantly faster than expected. The company is implementing a significant transformation initiative, moving from a matrix to a single-segment structure to streamline operations and enhance competitive positioning. For 2025, management projects organic revenue growth of 3% to 4%, and EBITDA margin expansion of 70 to 120 basis points to reach 21.3% to 21.8%.
Xylem Inc. (NYSE:XYL) is seeing increased demand for outsourced water solutions, though this can drive some lumpiness in performance as revenue streams are associated with system build-outs before generating long-tail recurring revenue. Water Solutions and Services segment demonstrated robust demand with orders increasing 8%, driven by strength in capital projects and dewatering. Revenue growth was strong at 11%, with strength in capital projects, dewatering and services. The segment maintains a $1 billion backlog and strong funnel activity across all businesses, which demonstrates a strong outlook on the company’s water business.
9. Mueller Water Products Inc. (NYSE:MWA)
Number of Hedge Fund Holders: 35
Mueller Water Products Inc. (NYSE:MWA) is a leading manufacturer and supplier of products and services used in water distribution and infrastructure systems. MWA provides a wide range of solutions, including valves, fire hydrants, pipe fittings, and leak detection technologies, catering primarily to municipal and industrial water systems. The company plays a crucial role in ensuring the efficiency, safety, and longevity of water networks, helping cities and utilities manage water flow, reduce losses, and modernize aging infrastructure.
Mueller Water Products Inc. (NYSE:MWA) achieved record results in the latest quarter, driven by net sales growth of 18.7% YoY that exceeded expectations. The company delivered strong financial performance with adjusted net income per diluted share of $0.25, representing a 92% increase compared to the prior year, while generating $42 million in free cash flow. Based on strong 1Q 2025 performance and benefits from recent price actions, the company increased its 2025 guidance for net sales, representing a YoY increase of 4.2% to 5.7%. A significant operational milestone was achieved with the closure of the legacy brass foundry and transition to a state-of-the-art facility, which is expected to generate an 80- to 100-basis-point annualized improvement in gross margin starting in 2H 2025. The company maintains a strong financial position with a net debt leverage ratio below 1x and no debt maturity until 2029.
Management of Mueller Water Products Inc. (NYSE:MWA) believes they can capture the benefits from the investments needed to address the aging North American water infrastructure and the expected incremental spending associated with the federal infrastructure bill, particularly with lead service line replacement projects. During the latest earnings call, the CEO said that MWA is well positioned to accelerate sales growth and capture the benefits from favorable long-term end market growth trends through product innovation and service.
8. A. O. Smith Corporation (NYSE:AOS)
Number of Hedge Fund Holders: 37
A. O. Smith Corporation (NYSE:AOS) is a global manufacturer specializing in water heating and water treatment solutions for residential, commercial, and industrial applications. Headquartered in Milwaukee, the company is a leading provider of high-efficiency water heaters, boilers, and purification systems, with a strong presence in North America, China, and India. The innovative technologies of AOS focus on energy efficiency, sustainability, and smart water management, catering to growing demand for reliable and eco-friendly water solutions. Its extensive distribution network and commitment to research and development have solidified its reputation as a trusted name in the water industry.
A. O. Smith Corporation (NYSE:AOS) reported lower sales and earnings in 2024 compared to their record 2023 performance. In North America, sales increased slightly due to higher boiler and water treatment sales along with water heater pricing benefits, though these were offset by lower heater volumes. The company faced challenges in China where weak economic conditions negatively impacted consumer demand, leading to a 4% YoY decrease in the Rest of World segment local currency third-party sales. The company took strategic actions including completing the construction of a tankless manufacturing facility, implementing a strategy to improve North America water treatment business margins, and reorganizing the China business to reduce costs.
Despite a slow 2024, the outlook for 2025 is optimistic, as management projects EPS guidance of $3.60 to $3.90 per share, with the midpoint slightly higher than 2024 adjusted EPS. A. O. Smith Corporation (NYSE:AOS) plans to repurchase approximately $400 million of shares in 2025, higher than previous years, reflecting confidence in strong free cash flow generation. Management expects relatively flat industry growth in core North America water heater and boiler markets, while anticipating continued soft market conditions in China. The restructuring actions in China are expected to be mostly implemented by the second quarter with anticipated annual savings of approximately $15 million.
7. Tetra Tech Inc. (NASDAQ:TTEK)
Number of Hedge Fund Holders: 37
Tetra Tech Inc. (NASDAQ:TTEK) is a leading consulting and engineering firm specializing in water, environment, sustainable infrastructure and energy solutions. The company operates across more than 100 countries, serving government agencies, commercial clients, and industrial sectors. TTEK focuses on high-end consulting and technical services, leveraging data-driven approaches and advanced analytics to address complex water management, environmental restoration, and climate resilience challenges. Its expertise spans water treatment, flood mitigation, ecosystem restoration, and smart water solutions, positioning it as a key player in the global water sector. The California-based company ranked fifth on our recent list of 16 Best 52-Week Low Stocks To Buy Now According to Short Sellers.
Tetra Tech Inc. (NASDAQ:TTEK) achieved record results in the latest Q1 2025, with net revenue increasing 18% YoY and operating income growing 24% YoY. The company’s earnings per share increased 25% YoY to $0.35, exceeding guidance and consensus expectations, while backlog grew 15% YoY. Both segments performed strongly, with Government Services Group (GSG) revenue up 36% and Commercial International Group (CIG) delivering a 13% margin. The company saw significant growth across various sectors, with US federal clients up 32%, state and local revenues up 47%, and U.S. commercial net revenues up 7% year-on-year. International work represented over one-third of revenues, including water programs in the UK and Ireland, infrastructure services in Canada, and defense infrastructure work in the UK and Australia.
Despite recent challenges including USAID contracts being put on hold for review, management maintains confidence in the company’s fundamental drivers, citing strong demand for water design services, disaster preparedness and federal IT modernization. Management claims that water is at the forefront of recovery needs post disasters and essential to cities and growing communities across the US and internationally. Water scarcity remains a fundamental driver, with solutions needed beyond single sources including desalination, water reuse, storm water capture and other alternative water sources. These water-related drivers are expected to extend beyond 2030, supporting the company’s long-term growth prospects.
6. American Water Works Company Inc. (NYSE:AWK)
Number of Hedge Fund Holders: 41
American Water Works Company Inc. (NYSE:AWK) is the largest publicly traded water and wastewater utility in the United States, delivering essential water services to residential, commercial and industrial customers across multiple states. The company owns and operates a vast network of water treatment plants, pipelines, and distribution systems, ensuring reliable access to clean water. AWK primarily serves regulated utility markets but also provides water-related services to military installations and municipalities through its non-regulated business segment. It plays a critical role in modernizing aging water systems and addressing emerging challenges like water scarcity and quality.
American Water Works Company Inc. (NYSE:AWK) delivered 2024 earnings of $5.39 per share, representing 8% YoY growth, as it successfully executed its plan in 2024, investing more than $3 billion in infrastructure. The company met its acquisition target by adding nearly 70,000 customer connections and has over 24,000 customer connections under agreement as of early 2025. For 2025, the company affirmed its earnings guidance of $5.65 to $5.75 per share, representing an 8% YoY growth compared to weather-normalized 2024 EPS.
American Water Works Company Inc. (NYSE:AWK) maintains its long-term targets of 7% to 9% EPS and dividend growth, driven by 8% to 9% rate base growth. AWK’s geographic footprint and regulatory diversity, combined with its capital plan focused on basic infrastructure renewal, drives the low-risk nature of its growth plans. Management believes that the company’s commitment to solving customer problems, particularly addressing aging infrastructure and water quality challenges, positions it for consistently strong earnings and dividend growth for many years ahead.
5. Primoris Services Corporation (NYSE:PRIM)
Number of Hedge Fund Holders: 42
Primoris Services Corporation (NYSE:PRIM) is a leading specialty contractor providing construction, engineering, and maintenance services across various infrastructure markets in North America. The company operates in diverse sectors, including utilities, energy, transportation, and water infrastructure. PRIM plays a significant role in water-related projects, offering pipeline installation, water treatment facility construction and stormwater management solutions. Its expertise extends to large-scale civil and industrial projects, supporting municipal and private clients in developing resilient infrastructure.
Primoris Services Corporation (NYSE:PRIM) achieved its best year in company history for revenue, earnings, backlog and cash flow from operations in 2024. The company finished the year with $11.9 billion in total backlog, booking more than $7.7 billion of new work during the year, exceeding their goal by $1.2 billion or 18%. The company generated record cash flow from operations exceeding $500 million, marking a significant milestone. In the renewables business, revenue approached almost $2 billion in 2024, with approximately $3.1 billion in backlog at year-end.
Looking ahead to 2025, Primoris Services Corporation (NYSE:PRIM) expects earnings per fully diluted share to be between $3.70 and $3.90 and adjusted EPS between $4.20 and $4.40 per share, representing double-digit percent growth from 2024 at the midpoint. The company’s adjusted EBITDA guidance for 2025 is set at $440 million to $460 million. Management remains optimistic about continued growth, particularly in power delivery, renewables, and power generation markets, especially in Texas where they maintain a strong position. While there could be some inflationary pressure from tariffs, the company believes the market will adapt to meet the infrastructure demands of the growing North American economy.
4. Pentair plc (NYSE:PNR)
Number of Hedge Fund Holders: 49
Pentair plc (NYSE:PNR) is a global leader in water treatment and sustainable solutions, specializing in filtration, purification and fluid management technologies. Headquartered in the UK with operational leadership in the US, the company serves residential, commercial, industrial, and agricultural markets worldwide. PNR’s portfolio includes water filtration systems, pool equipment, pumps and smart water management solutions, helping customers optimize water quality and efficiency. The company’s focus on innovation and sustainability drives its efforts to address global water challenges, from providing clean drinking water to enhancing water conservation. With a strong presence in both consumer and industrial segments, PNR continues to expand its impact in the water sector through advanced technology and strategic growth initiatives.
Pentair plc (NYSE:PNR) is returning to growth after experiencing relatively flat top-line performance in recent years. The company operates across three segments focused on moving, improving, and enjoying water, positioning itself as one of the largest pure-play water companies. For 2025, the Pool segment is guided to grow 4-5% YoY, with growth coming from a small acquisition and a mix of price and volume improvements. The company maintains strong profitability, with the Pool business achieving a 33% return on sales. PNR has demonstrated pricing power with approximately 75% of revenue flowing through distribution, expecting price to contribute 1.5% to 2% growth in 2025 and offset inflation. The company is well-positioned to handle upcoming tariffs through inventory management, pre-buys, and pricing power.
Looking ahead, Pentair plc (NYSE:PNR) sees sustainable runway for margin expansion over the next 3-5 years through transformation initiatives in sourcing, operational footprint, and organizational excellence. The company maintains financial strength as an investment-grade company and dividend aristocrat, having raised dividends for 49 consecutive years, with the most recent increase being 9%.
3. Ecolab Inc. (NYSE:ECL)
Number of Hedge Fund Holders: 59
Ecolab Inc. (NYSE:ECL) is a global leader in water, hygiene, and infection prevention solutions, serving industries such as food and beverage, healthcare, hospitality, and manufacturing. The company provides comprehensive water treatment technologies, industrial cleaning solutions, and digital monitoring systems to enhance operational efficiency and sustainability. ECL plays a crucial role in water conservation and quality management, helping businesses optimize water usage, reduce waste, and maintain regulatory compliance. Its innovative approach, driven by data analytics and advanced chemistry, enables clients to improve safety, minimize environmental impact, and extend equipment life.
Ecolab Inc. (NYSE:ECL) serves over 1 million customer locations across 40 industries in more than 170 countries. The company operates through a razor-razor blade model where more than 90% of revenues come from consumable products that are critical to customers’ operations, resulting in predictable revenue streams. ECL company achieved record high operating income margins of 16.8% in 2024 and is confident in reaching its 20% margin target by 2027. The company’s long-term financial targets include 5-7% sales growth, 12-15% adjusted EPS growth, and 90-100% free cash flow conversion. ECL’s total addressable market is approximately $152 billion, with nearly half representing opportunities within existing customers. Innovation is a key driver of growth, with the company anticipating its largest innovation pipeline of $1.7 billion in 2025.
Ecolab Inc. (NYSE:ECL) is well-positioned to capitalize on growing global challenges around public health, food scarcity, water stress, and climate change, leveraging its innovative solutions, digital capabilities, and deep industry expertise to drive consistent financial performance and help its customers achieve their sustainability goals. In the opinion of management, ECL’s balanced business model, strong cash flow, and disciplined capital allocation priorities position the company for continued growth and shareholder value creation.
2. Waste Management Inc. (NYSE:WM)
Number of Hedge Fund Holders: 67
Waste Management Inc. (NYSE:WM) is North America’s largest provider of waste collection, recycling, and disposal services, catering to residential, commercial, and industrial customers. Based in Houston, Texas, the company operates an extensive network of landfills, recycling centers, and transfer stations, playing a critical role in sustainable waste management. While primarily focused on solid waste, WM is also involved in environmental services, including wastewater treatment and landfill gas-to-energy projects. By integrating advanced technologies and sustainability initiatives, the company aims to reduce environmental impact, enhance recycling efficiency, and support a circular economy, including in the water operations.
Waste Management Inc. (NYSE:WM) is demonstrating strong financial performance with projected 16-17% revenue growth, 15% EBITDA growth, and 17-18% free cash flow growth for 2025. The company’s core solid waste business is showing robust performance with strong price conversion and optimization execution, generating around 7% organic growth. The company has made significant progress in reducing SG&A costs to sub-10% of revenue through technology implementation, discipline, and cultural changes, and has invested $1.4 billion in recycling infrastructure improvements, which has resulted in reduced operating costs and improved productivity through automation.
Waste Management Inc. (NYSE:WM)’s recent acquisition of Stericycle positions it as a leader in medical waste, with doubled synergy targets of $250 million and expectations to reduce SG&A to 15% of revenue over three years. The company achieved 30% margins for the first time in its history in 2024 and expects to approach 50% long-term conversion of EBITDA to free cash flow. Customers are increasingly demanding sustainable and environmentally friendly services, driving demand for WM’s recycling and renewable natural gas offerings, which includes water-related projects.
1. Schlumberger Limited (NYSE:SLB)
Number of Hedge Fund Holders: 80
Schlumberger Limited (NYSE:SLB) is a global leader in energy technology, providing services and solutions for oil and gas exploration, drilling, production, and reservoir management. The company serves major energy producers with advanced technology, digital solutions, and engineering expertise. While traditionally focused on hydrocarbons, SLB has expanded into sustainable energy, including water management solutions for industrial and oilfield applications. Its water-related services include wastewater treatment, desalination, and water recycling, helping industries optimize resource use and minimize environmental impact.
Schlumberger Limited (NYSE:SLB) concluded 2024 with solid earnings and free cash flow, maintaining cycle-high margins despite moderating upstream investment growth. The company achieved its full year adjusted EBITDA margin target of 25%, generated robust free cash flow of $4 billion, and returned $3.3 billion to shareholders. Digital revenue grew significantly by 20% for the full year, exceeding the company’s high-teens growth targets. The company’s revenue from low-carbon markets and data center infrastructure solutions exceeded $850 million in 2024, with expectations for significant increases in 2025.
Looking ahead to 2025, Schlumberger Limited (NYSE:SLB) expects global upstream investment to remain steady compared to 2024, with deceleration in some resource plays being offset by resilient growth across select countries and customers. The company announced an increased dividend and accelerated share repurchase program, demonstrating confidence in its financial performance. SLB’s diverse portfolio across global operating areas, business lines, and exposure to both short- and long-cycle projects provides resilience against regional and market fluctuations.
Overall, Schlumberger Limited (NYSE:SLB) ranks first on our list of the 10 best water stocks to buy according to hedge funds. While we acknowledge the potential of SLB as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SLB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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