It has been said over and over that investing in water is one of the most defensive investment themes for all types of investors. Just try living without water. That means the water utilities have to be great investments, right? If life was just that simple.

BofA Securities has initiated coverage on three water utilities. It has a Buy, Neutral and Sell rating for these to be added into the firm’s water utilities coverage universe. When analysts issue new price targets these are generally to be considered 12-month targets.

These analyst recommendations and price targets are from BofA Securities analyst Ross Fowler. Tactical Bulls would always remind its readers and remind all investors that no single analyst report should ever be the sole basis to buy or sell a stock.

Any decision to buy or sell (or hold or short sell) is entirely up to each investor and the decision should be made with a financial advisor. There are also no assurances that any of the price predictions and the scenarios that back each of these calls up will actually come to fruition.

CALIFORNIA WATER – THE BUY

California Water Service Group (NYSE: CWT) is a $2.9 billion water utility started as Buy and with a $57 price objective. That implies strong upside of more than 17% from the current $48.65 share price, and a 2.3% dividend yield will make the implied upside nearly 20% if there are any additional pullback opportunities.

Fowler sees California Water (which is not just in California) as a relative value opportunity with a rate case growth kicker. It comes as a low P/E relative to peers and prospects for potentially higher growth are not reflected in the shares. Fowler also sees a strong balance sheet, and the “group low” valuation and a better regulatory climate helping shares outperform.

California Water serves water and wastewater services to more than 2.1 million people in California, Hawaii, New Mexico, Washington, and Texas.

AMERICAN STATES WATER – THE HOLD

American States Water Company (NYSE: AWR) was started as Neutral with a $85 price objective. This $3.1 billion water utility was shown to be a high-quality premium operator that is priced well at $82.79. This still implies upside despite the Neutral rating and it offers a 2.2% yield from its dividends.

Ross Fowler sees AWR as being among the highest quality water utilities under coverage, nit the “Neutral” rating is because of little room for multiple expansion. He also noted that its ability to resolve its pending 2025 rate case is good datapoint for California regulation and for a cost of capital review next year.

American States Water Company is the parent company of Golden State Water Company and for Bear Valley Electric Service. It serves over one million people in ten states and also has contracts with a dozen or more military bases around the U.S.

MIDDLESEX – THE SELL

And finally there is Middlesex Water Company (NASDAQ: MSEX) that was given a new Underperform rating and a $56 price objective. That is equivalent to a “Sell” rating elsewhere, and it is under the prior $61.32 closing price. Its 2.2% dividend yield does not even get close to making up for the projected downside here.

Fowler says that Middlesex’s slowing growth profile does not justify the premium valuation here. Hie report even calls it out as having the highest P/E premium in the U.S. utility coverage. Along with slower earnings expectations, the report is assuming capital spending needs will be more than 20% above management’s guidance. The additional expectation for rate base growth is likely to slow down to 7.6% versus 15% more recently.

Middlesex’s companies serve a population of around a half-million people in communities located in New Jersey and Delaware. This is a very small geographic footprint and it had a $1.1 billion market-cap.