American Water Works (NYSE: AWK) closed at $19.13. AWK announces on August 11 a secondary offering of 30M shares of common stock by selling stockholder, a subsidiary of RWE AG. AWK options were active on August 13 with volume of 15,064 contracts trading according to Track Data.

St. Mary Land Exp (NYSE: SM) closed $28.75. SM options were active on August 13 on volume of 7,195 contracts. SM September and November option implied volatility of 51 is below its 26-week average of 64, according to Track Data, suggesting decreasing price movement.

Options Update: Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

"Investors have given up on the water industry -- the sector has fallen 60% -- but the best firms have hardly missed a beat," says utility sector specialist Roger Conrad.

In Personal Finance, the advisor reviews the outlook for the sector and two of his favorite stocks -- American Water Works (NYSE: AWK) and Aqua America (NYSE: WTR).

"The EPA stimates the US will have to spend $335 billion over the next decade to keep the taps turned on, given aging infrastructure and supply degradation.

This post is part of a special annual report -- Top Stock Picks '09 -- in which TheStockAdvisors.com asked 75 leading newsletter advisors to select their favorite investment for the new year.

Roger Conrad, the advisory industry's leading authority on the utility sector, looks to American Water Works (NYSE: AWK) as his favorite investment idea for the coming year.

In The Utility Forecaster, he notes, "We now have the opportunity to buy America's premier water utility franchise at a discount to book value." Here, he explains the situation and his bullish outlook.

"In early 2003, Germany's RWE paid a hefty premium for American Water Works. Five years later in April 2008, RWE's new management took a $1 billion write-off to unload the company as an independent company in the U.S.

"As a result, we now have the opportunity to re-enter America's premier water utility franchise at a discount to book value.

"American Water has written off hundreds of millions in good will and overhauled oversight practices that had gone soft under RWE. But with third-quarter earnings surging 11% on a 6.2% revenue jump -- and more the same expected into 2009 -- its fortunes are building again.

Analyst upgrades:

• Baird upgraded Regal-Beloit (NYSE: RBC) to Outperform from Neutral based on valuation and growth expectations.
• Black & Decker (NYSE: BDK) and Lennar (NYSE: LEN) were upgraded to Buy from Neutral at UBS based on valuation.
• Kroger (NYSE: KR) and Public Storage (NYSE: PSA) were added to Goldman's Conviction Buy List.
• CIBC upgraded Biovail (NYSE: BVF) to Sector Performer from Sector Underperformer.
• Abercrombie & Fitch (NYSE: ANF) was raised to Neutral from Underperform at Cowen.

Analyst downgrades:

• Merrill downgraded Campbell Soup (NYSE: CPB) to Neutral from Buy and expects marketing and promotional spending to limit earnings growth in 2009 and 2010. The firm lowered their target to $35 from $42.
• Mechel Steel (NYSE: MTL) was cut to Underweight from Equal Weight at Morgan Stanley to reflect declining coal demand.
  
• Friedman Billings downgraded shares of Legg Mason (NYSE: LM) to Underperform from Market Perform on liquidity concerns given the Legg Mason's leveraged balance sheet and falling EBITDA. The firm lowered their target to $7 from $11.

MOST NOTEWORTHY: Taubman Centers, AstraZeneca and Blue Nile were today's noteworthy initiations:

• Friedman Billings believes Taubman Centers (NYSE: TCO) is very well positioned with its upscale regional malls and lifestyle centers to weather the current challenges in the current retail environment. Shares were assumed with an Outperform rating and $64 target.
  
• JP Morgan initiated AstraZeneca (NYSE: AZN) with a Neutral rating. The firm expects investor confidence in the coming months to improve as expectations are AZN's pipeline is low.
  
• Deutsche Bank finds Blue Nile (NASDAQ: NILE) fairly valued given the challenging economic environment and rising commodity prices and initiated shares with a Hold rating and $48 target.

OTHER INITIATIONS:

• Wachovia started American Water Works (NYSE: AWK) with a Market Perform rating.
  
• Heartland Payment (NYSE: HPY) was assumed with a Buy rating and $33 target at Citigroup.
  
• Goldman resumed coverage of AbitibiBowater (NYSE: ABH) with a Neutral rating.