As we continue to back-test and monitor the results for my upcoming newsletter, Dynamic Growth, the Fidelity Select Utility Fund jumped into our Top 10, taking over the #4 spot.

When we looked at the top 10 holdings of the Fidelity Utilities Fund, we were happy to see that the top two stocks in the portfolio are two of our favorite telecom stocks, AT&T (T) and Verizon (VZ). In fact, as of 06-30-06, 57.8% of the fund was in Telecom Services, and 41.2% in Utilities.

Here are the Top 10 holdings for the Fidelity Select Utility Fund;

VERIZON COMMUNICATIONS INC
AT&T INC
BELLSOUTH CORP
SPRINT NEXTEL CORP
QWEST COMMUNICATIONS INTL INC
EXELON CORP
FPL GROUP INC
FIRSTENERGY CORP
ENTERGY CORP
AES CORP
68.40% of the portfolio

Given the inflation problems caused by the rise in energy prices, Utilities will have to raise prices to keep pace with inflation. This could very well be the beginning of a new growth cycle for utilities.