FIW: Still Expensive, But This Water ETF Is Flowing In The Right Direction

Summary

• The First Trust Water ETF holds 36 companies that derive a substantial portion of their revenues from the potable water and wastewater industry.
• Over the last two years, I have relied on fundamental analysis to justify not buying FIW. In previous reviews, I've noted issues with FIW's valuation, quality, and earnings momentum.
• FIW has shown improvement on these factors over the last year, and despite it offering solid growth potential, it trades at 23.25x earnings, a rich multiple for the Industrial sector.
• As a result, I've assigned a neutral "hold" rating to FIW, but I believe there could be an excellent buying opportunity in the months ahead if its valuation decreases.

Dougal Waters

Investment Thesis

I last reviewed the First Trust Water ETF (NYSEARCA:FIW) on July 16, 2023, concluding that the water industry's supply chain challenges and the ETF's high valuation warranted only a "hold" rating. Since that article was published, FIW has lagged behind the Invesco

Analyst’s Disclosure: I/we have a beneficial long position in the shares of SPY either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.