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The Basic Needs Portfolio

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In May, I announced my intention to create a portfolio that embodied life's basic needs. 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, as well as command incredible pricing power in nearly any economic environment.

If you'd like a closer look at my reasoning behind each selection, just click on any, or all, of the following portfolio components:

Let's look at how our portfolio of basic-needs stocks fared this week.


Cost Basis


Total Value


Waste Management










NextEra Energy















Select Medical 










American Water Works





Procter & Gamble 





AvalonBay Communities









Dividends receivable




Total commission




Original investment




Total portfolio value




S&P 500 performance



Performance relative to S&P 500



Source: Yahoo! Finance; author's calculations.

Show me the money
One of the best aspects of owning companies that maintain solid cash flow in bad and good economic environments is that the dividends just keep on coming. As of today you'll notice a $0.60-per-share decline in credit payment facilitator MasterCard (NYSE: MA  ) which we shouldn't be too concerned about, as it's going ex-dividend today. Shareholders should expect their token $0.60 dividend on Nov. 7, 2013. Although MasterCard's dividend is by far the weakest of the group, it also possesses the greatest opportunity for improvement.

Individual news dominates
Few stories had as much pizzazz last week as September's U.S. auto sales, which showed their first drop in two years. What was really telling was that General Motors saw sales dip and miss estimates while Ford (NYSE: F  ) continued to plug higher with growth topping estimates. Sales at GM retreated a disappointing 11%; new truck sales proved encouraging but were undercut by a lack of supply. Meanwhile, Ford's fuel-efficient vehicle push continues to pay off with sales rising 5.8% from the year-ago period. Ford appears to be the smarter, and less expensive, of the two plays at the moment.

Global integrated oil and gas company Chevron (NYSE: CVX  ) had a bit of scare last week when it was forced to shut down and evacuate its Gulf of Mexico platforms as Tropical Storm Karen approached. Storms like this can actually have a mixed effect on oil drillers like Chevron -- they'll hurt production capacity if platforms are damaged, but can also temporarily boost the price of oil which is good for Chevron's margins. In this case it's the perfect scenario for Chevron with oil prices still near a two-year high and the company's Gulf workers heading back to their jobs.

Electric utility NextEra Energy (NYSE: NEE  ) had a double dose of news this week. UBS initiated coverage on the company with a neutral rating and a price target of $79, while the Florida Public Service Commission granted NextEra's Florida Power & Light the approval to recover $43.4 million in construction costs for additions and improvement to two existing nuclear facilities. Florida is among the states allowing electric utilities to recover some of the costs to upgrade or build new power-generating facilities, so this serves as good news for NextEra shareholders that their expenses won't just suddenly shoot through the roof.

Finally, shareholders in chip maker Intel (NASDAQ: INTC  ) were dealt a mixed deck of cards this past week. On the downside, we found out that Lenovo was ditching Intel's mobile Atom chip in favor of a Qualcomm processor in the next-generation K910 smartphone, known as the Vibe Z. Obviously, Intel is counting on mobile processor sales to drive growth in the future, so this is not an encouraging sign. On the flip side, Intel also announced a partnership with open-source hardware company Arduino to combined Arduino's Quark processors with Intel's hardware in the hope of getting these custom boards into smaller Internet-capable devices. While many early boards will be donated to universities, if they're well received it could be a jumping-off point for strong sales down the road.

Back to basics
I have to admit that it wasn't a particularly good week for the Basic Needs portfolio – perhaps even the worst week since its inception two months ago. However, this is a marathon and we're not even at the two-mile mark yet, so there's still plenty of time for these strong cash flow and dividend plays to prove their worth in up and down markets. We may have seen a rough week, but the long-term outlook of these companies hasn't changed, and neither has my resolve that this portfolio will vastly outperform the S&P 500 over the next three years.

Check back next week for the latest update on this portfolio and its 10 components.

The Plain-as-Day Path to Getting Rich
If there's one thing you'll notice about basic-needs stocks, it's that most pay a dividend -- and dividend stocks can make you rich. While they don't garner the notability of highflying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to 
rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

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9/29/2016 4:00 PM
CVX $101.27 Down -0.88 -0.86%
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Ford CAPS Rating: ****
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Intel CAPS Rating: ****
MA $100.61 Down -0.90 -0.89%
MasterCard CAPS Rating: *****
NEE $123.70 Down -2.78 -2.20%
NextEra Energy CAPS Rating: ***