California Water Service Group (CWT)

California Water Service Group (CWS) is a holding company that provides water utility and other related services in California, Washington, New Mexico and Hawaii through its wholly owned subsidiaries. The company's regulated business involves the production, purchase, storage, treatment, testing, distribution and sale of water for domestic, industrial, public and irrigation uses, and for fire protection. Its non-regulated business includes full water system operation, billing and meter reading services, as well as the lease of communication antenna sites, lab services, water rights brokerage, and its Extended Service Protection program.

The company financial performance has been less than inspiring to say the least. During 2005, the company delivered 132 billion gallons of water to its customers, down 3% from the 139 billion gallons delivered in 2004. Endorsing the same, its top line and bottom-line growth has been flat in 2006. However, it may be on the cusp of exciting times ahead as the operating environment for the company never looked so good.

Going forward the operational driver for this stock would be the improvement in the regulatory environment in California and the strategic driver would be the new U.S Environmental regulation and a dated water transmission infrastructure would act as a catalyst for consolidation in the industry. The company being the 2nd largest water utility company in the country can hope to come across favorable acquisition opportunities.

CWS is a regular dividend paying company with stable operational cash flows. In an environment where flight to quality syndrome has kicked in stocks like these may find favor. Thus this stock may not fly away but still has the potential to outperform especially if liquidity concern surfaces again. This might be good defensive stock that one might like to have in its portfolio for turbulent times.