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Try living without water for a few days. It is something you cannot cut back on or push out for very long. Investors have caught on that water is a must-own holding as well. The problem is that water investors have very limited choices because most water infrastructure is part of conglomerates or diversified companies. The good news is that two top water utilities are on sale, and they may be great bargain stocks for 2014.

These two picks are American Water Works Company Inc. (NYSE: AWK) as the first and top pick, with Aqua America Inc. (NYSE: WTR) as a back-up pick. Both are down from their highs, both are very defensive stocks that can be aggressively purchased on pullbacks and the analyst community sees big upside in the stocks considering how defensive these are by nature.

American Water Works Company Inc. (NYSE: AWK) remains our top water utility pick. We have been fans of this one for quite some time and have been calling it a buy since the stock was well down in the $20s, versus $42.50 now. This is the largest diversified regulated water utility by geography in America with some 1,500 communities in 16 states, and it claims a total coverage of more than 30 states covering 14 million people. Its market value is now $7.5 billion.

Trading at $42.50, it has a 52-week trading range of $36.56 to $45.09. The consensus analyst price target is almost $48.50, implying upside of 14.1%. Then there is also that 2.6% dividend yield, and that dividend likely will keep rising handily through time. We would point out that one analyst has a price target that is way up at $58.00. American Water Works trades at 19.4 times expected 2013 earnings and about 17.7 times expected 2014 earnings.

Aqua America Inc. (NYSE: WTR) is also a diversified regulated water utility company, and shares have gone on an unusual sale from the peak. It has regulated water coverage in communities located in 10 states covering approximately 3 million residents. This stock peaked in the summer and it is very rare for the stock to have sold off this much.

Trading at $24.50, it has a market cap of $4.3 billion, and its 52-week trading range is $19.62 to $28.12. The consensus analyst price target of $27.13 implies upside of 10.7% over the next year. Investors receive a 2.4% dividend yield here, and the dividend also will keep rising through time. As it is a defensive stock and at a market premium as well, Aqua America trades at about 21.5 times expected 2013 earnings and just over 20 times expected 2014 earnings.

Investing in select water holdings can bring the best of all worlds. Shares have proven to grow through time. Despite high earnings multiple premiums that have to be paid, they are highly defensive as they are somewhat monopolistic when you consider geographic dominance of each. They offer good dividends, and they pass the suitability tests of even the most conservative strategies like “widows and orphans.” It seems that the end of 2013 is offering a good setup for 2014 for these water utilities.