What a difference a year makes.


One year ago, Los Angeles-based water utility and operations firm Southwest Water Co. was reeling as record rainfall in Southern California meant people were using less of its water. The resulting drop in revenues translated into three consecutive losing quarters and the stock dipped beneath $10 a share.


Today, the company is back on a solid earnings footing $3 million in the black as of the third quarter 2005. What's more, thanks to a surge in investor interest in water utilities, its stock has had a record run-up, breaking through the $15 barrier for the first time in the last five years. Last week, the stock closed above $18 a share.


"The whole group of water utilities is doing exceedingly well. People are growing increasingly aware that water supplies are precarious. Those players who are in a position to provide high quality water at reasonable prices, like Southwest, are very attractive right now," said Neil Berlant, managing director of the water group with the Seidler Cos.


Berlant said that the group of 20 water company stocks that he tracks has jumped 17 percent since Jan. 1, while the Standard & Poor's 500 has risen 3.6 percent. Other water companies riding the investment wave include Cal-American Water Co., American States Water Co. and California Water Service Group.


Southwest Water's stock has shot up even more because of its diversified portfolio of water utilities, wastewater treatment facilities and contract operations, he said.


The company owns and operates a major water utility serving an estimated 300,000 residents in the San Gabriel Valley where the company's roots were launched a century ago when farmer Abel Garnier drilled a water well. His grandson Anton Garnier is the company's longtime chairman and chief executive. Southwest also owns several smaller water utilities scattered across several states in the southern U.S., including New Mexico, Texas and Alabama.


About 20 years ago, the company branched out into operations contracts at wastewater and municipal water utility facilities. The strategy was twofold: to diversify the revenue base to free the company from the vagaries of weather and to get a foot in the door to buy out small utilities.


"We can operate the water system and sewer treatment plant, do bill collection, train municipal employees just about anything they'd like us to do," Garnier told investors at a water conference last December.

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