"Warren Buffett's Berkshire Hathaway revealed a new position in Nalco Holding (NYSE: NLC); it's my favorite pure play on water filtration," says Chris Mayer in Daily Wealth.

"With a $1.6 billion market cap, Nalco is a small-cap stock, but it's actually one of the world's largest water-treatment companies. Customers use Nalco's products and services to prevent corrosion, contamination, and the buildup of harmful deposits.

"Buffett picked up 8.7 million shares. That makes Berkshire the second-largest shareholder in the company, with a little more than 6% of the shares.It's easy to see what Buffett likes.

"We see flowing profits from companies in the water sector involved with pipes, pumps, regulators and other equipment," notes Neil George.

In his industry-leading Personal Finance newsletter, the advisor offers a fascinating overview of three companies that help "utilities and other industries provide quality water service."

"Aging pipes are one of the most pressing challenges in the US and beyond. Studies show that in some municipalities, loss from leaky pipes accounts for as much as 10% of water consumption.

"Ameron International (NYSE: AMN) is a pipe manufacturer with operations on every continent. Earnings per share don't show smooth-line growth on a quarterly basis given the cyclical nature of construction. But it does show solid, year-over-year growth.

"There's some price volatility as investors are jarred with increasingly pessimistic domestic construction outlooks, but overseas earnings will continue to bolster the balance sheet.

"Watts Water Technologies (NYSE: WTS) manufactures pumps, valves and controls for a broad array of both consumer and industrial applications.

MOST NOTEWORTHY: Williams, Kilroy Realty and Dynavax Tech were today's noteworthy upgrades:

• RBC upgraded shares of Williams (NYSE: WMB) to Outperform from Sector Perform to reflect their expectation for three years of double-digit production growth in the company's E&P business.
  
• Kilroy Realty (NYSE: KRC) was upgraded to Outperform from Neutral as they believe the current valuation does not reflect the company's pure asset value.
  
• Oppenheimer upgraded shares of Dynavax Tech (NASDAQ: DVAX) to Outperform from Perform as they expect positive phase III results for Heplisav around mid-2008, driving shares higher.

OTHER UPGRADES:

• UBS raised Linear Tech (NASDAQ: LLTC) and Nalco Holding (NYSE: NLC) to Buy from Neutral.
  
• JP Morgan raised its rating on Verenium (NASDAQ: VRNM) to Neutral from Underweight.
  
• Discover (NYSE: DFS) was upgraded to Overweight from Underweight at Morgan Stanley.

MOST NOTEWORTHY: DPL Inc, IAC/InterActiveCorp, F5 Networks, Community Health and Parametric Technology were today's noteworthy upgrades:

• Baird upgraded DPL Inc (NYSE: DPL) to Outperform from Neutral following better-than-expected guidance.
  
• Citigroup upgraded IAC/InterActiveCorp (NASDAQ: IACI) to Buy from Hold as they believe HSN's turnaround, Lending Tree's stabilization and Ask's profitability ramp should drive EBITDA growth acceleration in 2008. The company was also upgraded to Overweight from Equal Weight at Lehman following IAC's better-than-expected Q3 report.
  
• Citigroup upgraded shares of F5 Networks Inc (NASDAQ: FFIV) to Buy from Hold, as they believe now is the time to buy the stock with sentiment at a low-point heading into an attractive 2008 product cycle.
  
• Stifel raised its rating on Community Health Systems Inc (NYSE: CYH) to Buy from Hold based on improved visibility from detailed 2008 guidance.
  
• Kaufman upgraded Parametric Technology Corporation (NASDAQ: PMTC) to Buy from Hold based on an impressive quarter and favorable industry trends.

OTHER UPGRADES:

• China Life Insurance Company Limited (NYSE: LFC) was upgraded to Peer Perform from Underperform at Bear.
  
• The Pep Boys - Manny, Moe & Jack (NYSE: PBY) was upgraded to Neutral from Sell at Goldman.
  
• JP Morgan added Nalco Holding Company (NYSE: NLC) to its Focus List.
  
• RBC upgraded Newmont Mining Corporation (NYSE: NEM) to Sector Perform from Underperform.

Decisions, decisions.

Suppose you have a wildly successful business in an ultra hot market. Time to sell?It's probably something to consider. Well, that's certainly the state of affairs in the private equity world.

According to the Wall Street Journal, the founder of Apollo Management LP, Leon Black, is mulling these kinds of cash-out issues [subscription required]. His private equity firm is one of the largest and has done deals such as for Harrah's Entertainment Inc. (NYSE: HET), Realogy Corp. (NYSE: H), and Nalco Holding Co. (NYSE: NLC).

Based on the market multiples -- such as for Fortress Investment Group LLC (NYSE: FIG) -- it looks like he can take home about $1.5 billion selling a minority stake of 10% but still keeping control of his destiny. To me, this is having your cake and eating it too.

What's more, by selling the stake to private investors, there's no need to go through the hassles of the IPO process. In other words, Black has more time to do deals. Although, if the Apollo stock is registered – which is likely to happen – it will become publicly traded within the year.

It's an interesting structure and is typical for small companies. As for Black, he does think out of the box and the back-door IPO does make a lot of sense.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.