Cramer: Off-the-radar water stocks making a splash

The U.S. spends billions on water infrastructure every year, and Jim Cramer knows that money is going into someone's pocket.

Both Aqua America and American Water have made a killing recently as municipalities privatize water systems to raise money, which means a different company will be on the hook for maintenance.

"While I am concerned that the easy money has already been made in these two water utilities, there may be other ways to play the water business," the "Mad Money" host said.

Flowserve, Pentair and Xylem are in the epicenter of the water business, proving filtration, irrigation, pumps, valves and other equipment. Cramer analyzed these three stocks to reveal which ones are worth investing in.

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Flowserve has had a tough time with the price of oil plummeting, as it got a chunk of its revenue from commodities processing, specifically in oil and gas. Cramer noted that things seem to be improving based on the company's upbeat guidance in April.

"Still, we really need to see oil and gas companies start fracking again before I would be willing to give this one my blessing, because the energy business is so important to them," Cramer said.

Next up was Pentair, which was on fire this year after overhauling some of its core business. Last month the Wall Street Journal reported that Pentair was looking to sell or spin off its valves and controls business. This could allow investors to focus on stronger parts of the company, give the stock a lift and generate cash for the company.

Finally there was Xylem, which has direct exposure to public water utilities. The two other companies are all about fluid handling, but the focus is more industrial and don't do as much work for municipal water systems.

Cramer was most intrigued by the public water side of the story. Xylem has benefited from increasing urbanization and industrialization worldwide, especially in emerging markets.

"If you are looking for beneficiaries from the water business, Xylem is the company that actually serves municipal water utilities — that's the one I like, although ideally you should wait for a lower price," Cramer said.

For investors looking for an industrial flow control play, Pentair was Cramer's pick over Flowserve, because it's cheaper and doing better. Ultimately Cramer was still impressed with Xylem because of the lack of oil and gas exposure.

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