Wedbush's water industry picks

|By:, SA News Editor

It's not surprising Q3  guidance in the water and renewable-energy sector was relatively subdued given mixed economic data and continuation of delayed orders for big projects, says Wedbush, however ...

Only Tetra Tach ((TTEK) showed ill-effect from the sequestration and instead there are encouraging signs out of municipalities.

Xylem (XYL) and Watts Water (WTS) said Europe had been worse than expected, but saw recent stabilization. While several noted weakness in China, A.O. Smith (AOS) bucked the trend with a 30% increase in sales there.

Wedbush's favorites  are low-risk, high performers like Pentair (PTR), Franklin Electric (FELE), and Valmont Industries (VMI). Valmont is a controversial name, but the team fells concerns over slowing irrigation business are baked into the stock and the valuation - particularly given the balance sheet and ROIC - is compelling.

Names to avoid are Nuverra Environmental (NES), Aegion (AEGN), and Energy Recovery (ERII) given disappointing quarters for the first two and an extremely overvalued ERII.

ETFs of note: FIW, CGW, PHO, PIO.