In our investment strategies report this week, we spoke to portfolio manager Neil Berlant of the PFW Water Fund. As the name suggests, Mr. Berlant fund is unique in that it is exclusively interested in investing in the water industry.

According to Mr. Berlant, this is a “genuinely an explosive and extraordinarily attractive industry.” Mr. Berlant predicts the price of water is going to go up to two or three times what it costs now over the next few years. This is a result of the demand cure for more plentiful and cleaner water becoming steeper and steeper. Mr. Berlant sees little chance of companies in this space declining any time soon, given the necessity of this utility, and the fact that it has so long been taken for granted.

For the full interview with Mr. Berlant, including a complete overview of what he looks for in water companies, and wide variety of stock picks in this space, click here.

This week’s Off the Record features a focus on restaurants. In these tough economic times, picks in this sector are tough, but these CEOs and analyst managed to find some bargains:

Three analysts were very positive about BJ’s Restaurants (BJRI):

“I love BJ’s management, with Gerald Deitchle, who was the former CFO of The Cheesecake Factory. He understands how to launch a national, premium chain like this. I like what he is doing there.”

“On the smaller cap side, I think it’s BJ’s management. Gerald Deitchle and his group of executives are among the best in terms of smaller companies in the business.”

“I just really have to compliment their effort, especially in this difficult environment. I admire their taking a long-term approach to their business and staying on course. Also, they are being very strategic about every decision, being very cognizant of current conditions, but not getting too caught up in it.”

And an  analyst and a CEO picked Panera Bread (PNRA):

“In terms of the one that has reacted best to this difficult environment, I’d give Panera the best grade there. That’s partly because they messed up last summer, but they fixed it quickly.”

“Panera is a name that I admire and respect. You can’t buy another franchise at Panera. They’re pretty well sold out.”

For the Off the Record report on Restaurants, including more stock picks despite the current economic climate, click here.  

Delving into our focus on retail/restaurants this week, we spoke with analyst Brad Stephens about his area of coverage: teen retail. When we asked Mr. Stephens what was attractive in this space, right out of the gate, Mr. Stephens told us “Not much.” Though there a few companies Mr. Stephens recommends (available in the full interview) below are two he recommends you stay away from:

• bebe (BEBE)- “It’s at $9.60 today, it’s got $4 a share in cash, and it generates cash. So theoretically you would think this is the time to be buying it; unfortunately they have a very large exposure to the housing impacted states, especially California and Nevada, and that customer is starting to trade down a little bit. They are starting to move to the fast fashion retailers like H&M and Forever 21,and on down the line. So they are trading down. Until they recarve out the niche, results continue to be under pressure. And also I think when you look at the fashion out there, you’re seeing a trend away from patterns and they are very strong in patterns. So it seems like everything happens to be moving against them right now.”
• Hot Topic (HOTT)- “It’s a very cheap stock theoretically, it trades about 3.5 times EBITDA. They have a niche with punk rock, very music oriented, but the problem here is that over the last two second halves of the year, they’ve improved their merchandise margin about 600 basis points, all through better inventory management, yet they haven’t had a positive quarter of traffic trends in their stores. So the number of people going to their stores has gone down for 17 straight quarters. If they continue to do that, ultimately you deleverage your fixed costs and the situation can get very ugly. So while the stock is cheap, we would prefer to be other places right now.”

For the complete interview with Mr. Stephens, including an overview of this space, and his view on where attractive valuations lie, click here.

Wachovia’s new CEO, Robert Steel, continues to clean house (seeearlier blog).  Today the bank formally announced that the bank’s chief risk officer, Donald Truslow would resign as soon as his replacement was found.  Truslow had been with the bank since 1980.  According to Paul Davis of the American Banker,

Wachovia’s top risk management functions have attracted mounting scrutiny since the company’s October 2006 purchase of Golden West Financial Corp., an Oakland thrift that specialized in adjustable-rate mortgages. The company has also gotten unwelcome attention from regulators on other issues. 

Steel is working hard to make the impression he is in charge and intends to turn the ship around. There is probably more management changes to come.  The real question remains, what can Steel and his team do to help the struggling bank?  Stay tunedFor more:Boston Globe  Investment News  Forbes