This ETF Is Poised to Benefit From an Inevitable Trend: Powershares Water Resource Portfolio (PHO), Companhia de Saneamento Basico (ADR) (SBS), California Water Service Group (CWT)

Powershares Water Resource Portfolio (NYSEMKT:PHO) has a nice mix of industrial, utility, and other water-related businesses. Additionally, there is a good mix of small and mid capitalization companies as well as geographic diversity. Even at all-time highs near $23 per share, Powershares Water Resource Portfolio (NYSEMKT:PHO) offers a reasonable valuation with an average P/E of 16. However, while the expense ratio of 0.6% is lower than most actively managed mutual funds, this represents a much higher rate than the 0.1% expense ratio for SPDR S&P 500 ETF Trust (NYSEARCA:SPY).

Will PHO outperform the S&P 500

The big question for investors is whether PHO will outperform the market. Over the past 5 years, Powershares Water Resource Portfolio (NYSEMKT:PHO) has slightly outperformed the S&P 500 as noted by the chart below:

Note: the chart above depicts a sharp decline in the share price of SBS; this is the result of a 2:1 stock split that occurred in January 2013 and not a dramatic decline in the performance of an investment in SBS.

What stands out in the chart above is that some of PHO’s holdings have significantly beaten the market, while others have lagged substantially. Last summer, I made the case that Itron was poised to outperform the market; thus far, that has not come to fruition as the market has rallied and Itron’s stock remains stagnant.

This is an excellent example of how the broad long-term investment thesis makes sense and has not changed, but the individual performance of a particular company has not lived up to expectations (thus far). For investors that would rather ride the larger trend rather than try to pick out the single biggest winner, Powershares Water Resource Portfolio (NYSEMKT:PHO) is a solid alternative worth considering.

The article This ETF Is Poised to Benefit From an Inevitable Trend originally appeared on Fool.com and is written by Brian Shaw.

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