The Basic Needs Portfolio

Nearly three months ago 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 the past 10 weeks I've detailed 10 diverse companies that I feel will outperform the broad-based S&P 500 over the long run 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, I would encourage you to review them before reading on:

Today will mark the beginning of trading for this Basic Needs portfolio. As a reminder, all dividends received will collect as cash, one-time commission costs will count against the portfolio, and these stocks will be held (no trading allowed!) for a period of three years. I plan to update this portfolio every Monday to track its progress with the intent on showing how stable an influence basic needs stocks can be for your investment portfolio -- and your sleep!

Let's have one final look at the investment portfolio:

Company

Cost Basis

Shares

Total Value

Forward P/E

Dividend Yield

Waste Management

$42.60

23.24

$990.02

17.8

3.4%

Intel

$23.22

42.64

$990.10

11.7

3.9%

NextEra Energy

$87.94

11.26

$990.20

16.6

3%

Mastercard 

$645.57

1.53

$987.72

21.1

0.4%

Chevron

$124.95

7.93

$990.85

10.2

3.2%

Select Medical 

$8.96

110.49

$989.99

9.3

4.5%

Ford

$17.50

56.57

$989.98

10

2.3%

American Water Works

$43.13

22.96

$990.26

18.1

2.6%

Procter & Gamble

$81.29

12.18

$990.11

17.4

3%

AvalonBay Communities 

$133.95

7.39

$989.89

19.5

3.2%

Cash

   

$0.88

   

Dividends receivable

   

$0

   

Total commission

   

($100.00)

   

Original investment

   

$10,000.00

   

Total portfolio value

   

$9,900.00

   

Source: Yahoo! Finance.

Each week from here on out I'm going to highlight the week's biggest stories, movers, and dividends. But since this is the inaugural week -- and we'll start down 1% because of commission costs -- let's just take a look at five interesting news events, primary earnings-driven, from the past week.

Refuse giant Waste Management (NYSE: WM  ) reported its second-quarter earnings results on Tuesday and unfortunately missed the Street's EPS estimates for a third straight quarter. The results weren't nearly as poor as they sound, though, with revenue jumping 2% to $3.53 billion and EPS improving 16% from the year-ago period. Its biggest challenge was a decrease in commodity pricing, which reduced recycling volumes. However, over time I see this as a minimal concern as socially responsible lifestyles become more mainstream. The good news? Waste Management's pricing power remains solid and it should be able to exact rate increases across the board when needed.

Sticking with the earnings theme, oil giant Chevron (NYSE: CVX  ) reported its second-quarter results on Friday. Like Waste Management, the numbers on the surface failed to impress. Total income fell year over year to $5.37 billion from $7.21 billion, with revenue down $5 billion to "just" $55 billion for the quarter. Chevron blamed its weak results on exceptional strength from its downstream businesses in the year-ago period, and maintenance repairs to its refineries during the past quarter. On the bright side, Chevron remains on track to be a gigantic liquefied natural gas player with its Angola and Australian projects coming right along. Chevron also declared a $1 quarterly dividend payable on Sept. 10 just days earlier.

One company that had no problem meeting and beating investor expectations was consumer goods behemoth Procter & Gamble (NYSE: PG  ) . Delivering its fourth-quarter results on Thursday, P&G delivered $0.79 in core EPS, but the big story was a 4% rise in organic sales growth on 5% unit volume growth. That's huge for P&G and a signal that its heavy advertising campaign for its core brand-name products might finally be paying dividends. With former CEO A.G. Lafley back at the helm, I have to think P&G has triple-digit share price potential within two years.

Electric utility provider NextEra Energy (NYSE: NEE  ) also spent its time in the limelight after reporting its second-quarter results. Overall, revenue improved by a tad more than 4% with adjusted income coming in at $1.46. Comparatively, revenue was about $60 million light, but NextEra's EPS crushed estimates by $0.17. Furthermore, while NextEra did forecast that the second half of 2013 will be a bit weaker than the first in terms of earnings growth, it nonetheless guided toward the high end of its previous EPS forecast of $4.70 to $5.

And finally, for one non-earnings-related news event, Ford (NYSE: F  ) continued to dominate its peers by reporting an 11% increase in July sales, its biggest increase since 2006, and a retail sales surge of 19%, its biggest July increase since 2005, according to its press release. Leading the charge were Ford's small and fuel-efficient cars, which delivered sales growth of 32% (the Fiesta led the way with an 89% jump) while its market-leading F-Series pickups drove to their best July in terms of sales since 2006. Ford's fresh designs, leading engines, and top-notch leadership look ready to drive it to further gains.

Stay tuned next week when we get our first look at this portfolio in action!

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Read/Post Comments (1) | Recommend This Article (8)

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  • Report this Comment On September 21, 2013, at 1:54 PM, jaybird43 wrote:

    I like the concept and agree with a strategy with basic needs. I own 3 of these companies already, WM,INTC, and PG. I don't know that I consider a credit card company as a "basic" need. And I would never pay up for a company share at $600 plus with a .04% yield! I believe a company should at least pay a yield to cover the inflation rate. But that's me. I'll be watching to see the progress. Good job

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10/31/2014 10:55 AM
CVX $118.11 Up +0.91 +0.77%
Chevron CAPS Rating: *****
F $14.13 Up +0.18 +1.29%
Ford CAPS Rating: ****
NEE $99.38 Down -0.53 -0.53%
NextEra Energy, In… CAPS Rating: ****
PG $87.07 Up +0.13 +0.15%
Procter & Gamble CAPS Rating: ****
WM $48.93 Up +0.38 +0.78%
Waste Management CAPS Rating: *****

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