Water shortage, invest in water treatment stock?

Today, I read two analyst reports about the Hyflux and Epure from different broker. The timing is quite coincident that they feature the water stock on the same day. Water related stock has been quite a hot sector, on and off. Since year 2004 till now, I think. But if you bother to check on their performance, think one should be disappointed.

When the sector is hot(a usual stock market behaviour), the valuation get a little bit out of hand. At the current market condition, every stock is back on ground again. Often we hear, the world is short of water etc etc. It is logical to think the water related stock would do well.

Think again. If you are hoping for consistent earning growth, maybe this is not your cup of tea. Water treatment company operate on projects and the earning could fluctuate from quarter to quarter. Many wants to go into operating treatment plant and receiving recurrent cashflow. However, that also means they have to invest heavily upfront. It is a capital intensive business.

One should really think long term to do well. Having said that, the two companies mentioned seem to be the strongest on SGX right now.