Boaty and I have been running through Water and Power plays for the LTP and we’ve settled on:
🚢 Idea 1: American Water Works (AWK) – “Best of Breed” Water vs FIW
Thesis in one line:
If the market is happy to pay ~23x for a basket of water names in FIW, we’d rather own the largest, cleanest regulated water utility at ~22x, with direct leverage to the same “water + infrastructure + data center” story.
Why water matters in the AI build‑out
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- Data centers are not just power hogs, they are water‑intensive – especially in hotter, drier states and where evaporative cooling is used.[gravel2gavel]
- U.S. water‑related capex and opex for data centers is forecast to rise to about $800M/year by 2030, roughly a 31% increase from current levels.[bluefieldresearch]
- Large tech companies are already co‑funding local water infrastructure (one hyperscaler has committed up to $400M for public water projects in Louisiana alone) to secure future capacity.[arxiv]
That capex does not happen in a vacuum; it flows through regulated water utilities and local systems that expand treatment plants, pipes, and reuse facilities – usually at a regulated return.
Why AWK rather than FIW
Benchmark:
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- FIW (First Trust Water ETF) trades at around 23x earnings with a ~1.2% yield as a diversified water‑theme basket.[robinhood]
AWK specifics:
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- Largest U.S. investor‑owned water utility, serving ~3.5M customers in 16 states.[pluang][youtube]
- Current stock price about $124, market cap ~$24B.[robinhood]
- P/E ~21.9x, i.e., slightly cheaper than the FIW basket multiple.[robinhood]
- Business model is straightforward: regulated water and wastewater, earning prescribed returns on rate‑based capex – exactly the setup you want when water infrastructure spend is set to rise.[youtube][pluang]
Frame for Members:
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- FIW tells us “the water theme trades at ~23x.
