In May, I announced my intention to create a portfolio that embodied life’s basic needs. Understandably, many of the truly basic needs in our everyday lives have transcended far beyond just the need for water and shelter. To that end, over a period of 10 weeks I detailed 10 diverse companies that I think will outperform the broad-based S&P 500 over a three-year period because of their ability to outperform in both bull and bear markets, and command incredible pricing power in nearly any economic environment.
If you’d like a closer look at what my reasoning was behind each selection, you can do so by clicking on any, or all, of the following portfolio components:
Waste Management
Intel
NextEra Energy
MasterCard
Chevron
Select Medical
Ford
American Water Works
Procter & Gamble
AvalonBay Communities
Let’s look at how our portfolio of basic needs stocks fared this week.
| Company | Cost Basis | Shares | Total Value | Return |
|---|---|---|---|---|
| Waste Management | $42.60 | 23.24 | $927.74 | (6.3%) |
| Intel | $23.22 | 42.64 | $966.65 | (2.4%) |
| NextEra Energy | $87.94 | 11.26 | $900.91 | (9%) |
| MasterCard | $645.57 | 1.53 | $974.03 | (1.4%) |
| Chevron | $124.95 | 7.93 | $961.20 | (3%) |
| Select Medical | $8.96 | 110.49 | $917.07 | (7.4%) |
| Ford | $17.50 | 56.57 | $961.69 | (2.6%) |
| American Water Works | $43.13 | 22.96 | $901.87 | (8.9%) |
| Procter & Gamble | $81.29 | 12.18 | $939.69 | (5.1%) |
| AvalonBay Communities | $133.95 | 7.39 | $928.11 | (6.2%) |
| Cash | $0.88 | |||
| Dividends receivable | $32.73 | |||
| Total commission | ($100.00) | |||
| Original investment | $10,000.00 | |||
| S&P 500 performance | (3.2%) | |||
| Performance relative to S&P 500 | (2.7%) |
Sources: Yahoo! Finance, author’s calculations.
With earnings season on the back burner for at least another month, individual direct and indirect news stories dominated this week. But unlike last week, none of them were dividend-based.
New products driving growth
Ford Motor Company (NYSE:F) has to be the headliner this week, with cumulative U.S. auto sales for all major automakers adding up to a production level that we haven’t seen in six years. For August, Ford Motor Company (NYSE:F) saw unit sales rise 12%, with the compact Ford Fiesta leading the charge, up 61.5%. Although Ford was outdone by General Motors with a 15% increase and its Japanese competitors, I wouldn’t be too concerned, as Ford Motor Company (NYSE:F)’s fuel efficiency and heavy-duty truck-line has proven to have an edge over its competitors over the long run.
Chipmaker Intel Corporation (NASDAQ:INTC) also made some noise of its own, with a presentation at its headquarters for analysts that outlined some of its upcoming products. Unveiled were the C2000 microserver chip, which is used for file and database management, as well as chips that can be used for Ethernet networking to move data faster between servers. Historically, Intel Corporation (NASDAQ:INTC)’s innovation has never been a question mark. But in the past couple of years it’s failed to see how quickly PCs would decline in importance, making its new products all the more important for investors to pay attention to.
Even consumer-goods giant The Procter & Gamble Company (NYSE:PG) got in on the new product action by unveiling its plans to introduce a lower-cost Tide detergent in the U.S known as Tide Simply Clean. If you recall, The Procter & Gamble Company (NYSE:PG) has the largest advertising budget in the world and certainly isn’t afraid to use it to instill confidence in its brands. However, big ad spending hasn’t translated into optimal results for its iconic detergent brand, as weak consumer spending and higher payroll taxes have pushed some shoppers toward lower-priced store detergents. Consider this another move by A.G. Lafley to help bring consumers back to the P&G brand.
Also in the news
Shareholders of oil giant Chevron Corporation (NYSE:CVX) have to be happy, as they found out that their company had won a bid to explore for shale gas in Western Lithuania in the Silute-Taurage prospect. It probably won’t come as a surprise that Chevron Corporation (NYSE:CVX) was the only bidder in the region, but it nonetheless could give Chevron Corporation (NYSE:CVX) another edge over its peers in the international markets if it does find retrievable hydrocarbons in the region.
Finally, don’t ignore a study out last week by the Kaiser Family Foundation with regard to Obamacare health premiums. Although you’ll find no mention of Select Medical Holdings Corporation (NYSE:SEM) or other hospital operators mention in its study, KFF’s 18 state/region study noted that 15 of the 18 regions are showing health insurance premiums that are below the Congressional Budget Office’s expectations. The good news for Select Medical is that if premiums are indeed lower than expected, it might entice more people to sign up for health insurance than initially expected. Premium costs have been the number one factor keeping consumers on the sidelines, so this study could turn into a positive for Select Medical Holdings Corporation (NYSE:SEM) and other acute care facility operators.
Back to basics
Although the portfolio gained a few pennies this week, it certainly wasn’t anything to write home about relative to the S&P 500’s four-for-four performance in the Labor Day-shortened week. Ultimately, I didn’t build this portfolio to compete on a week-to-week basis but to outperform over the long run. With more dividend payments scheduled to hit our pocketbook next week and not a fundamental flaw visible in this portfolio, I see no reason not to trust these basic needs stocks over the long-term.
Check back next week for the latest update on this portfolio and its 10 components.
The article The Basic Needs Portfolio originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends Ford, Intel, MasterCard, and Waste Management. It also recommends Chevron and Procter & Gamble.
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