Roger S. Conrad

There weren't any big surprises in our Focus List earnings reports this quarter, which is the way we like it. But there are a lot of bargains in all three portfolios that you can move into now. The story of essential service stocks is just beginning.

Detroit's recent bankruptcy serves as a reminder of the potential risks in the municipal-bond market. Here are two strategies to insulate your fixed-income portfolio and build wealth over the long haul.

Verizon Communications' (NYSE: VZ) second-quarter results demonstrate why its stock trades at a premium, but investors should wait for a pullback before adding to their positions .

Thanks again for finding me and giving Conrad’s Utility Investor a try.

This inaugural issue continues my almost three decades of covering essential-services stocks, with a few changes I think you’ll find useful.

My approach, as always, is to focus on companies which pay safe, growing dividends that will build our wealth over time. Names that provide essential services--electricity, heating, communications, water and pipeline capacity--enjoy stable demand and generate reliable cash flow, regardless of economic conditions or Wall Street’s latest investment fad.

More than 100 years after these industries came into being, they’re more critical than ever to a functioning society. Usage can rise and fall from quarter to quarter, or even year to year. But as the global economy grows, so do these businesses--and the benefits accrue to shareholders in the form of rising dividends and capital appreciation.

No merger between regulated utilities has ever failed to produce a stronger, more viable entity. Nor has any regulated utility ever vanished, save through consolidation. Even the owner of Three Mile Island--the former Metropolitan Edison--was able to come back from the 1978 accident. And investors who bought at the bottom realized a 35-to-1 return on their money over the subsequent decade.

No other industry can make these claims. That’s not to suggest that regulated utilities haven’t suffered severe setbacks at times; however, given the nature of the assets that these companies own, stocks and bonds issued by essential-service providers usually recover from whatever disaster befalls them.

Hydroelectric power is the world’s cleanest and cheapest source of baseload power. And with 5,900 megawatts of installed capacity and a full pipeline of new projects, Brookfield Renewable Energy Partners (TSX: BEP-U, NYSE: BEP) is the world’s premier pure play.

Telefonica’s woes can be squarely blamed on aggressive global expansion right up to the great crash of 2008. Revenue growth in Latin America has offset shrinking in Spain and elsewhere in Europe but the Continent’s credit crunch has forced the company to sell assets to reduce its debt load, even as its credit rating has been cut. But things are looking up.

Discipline, consistency and hard work don’t always guarantee success. But they're the necessary foundation of every winning investment strategy.

Utility stocks might be due for a pullback, but the risks that rising interest rates pose to the sector are overblown.