Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



The Basic Needs Portfolio

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 last 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.

Earnings reports
Even the Basic Needs portfolio can take a break from dividend payments for one week to focus on the real long-term driver for these10 companies: their bottom-line results. Last week three companies reported their quarterly results.

Perhaps no report was more exciting than that of automaker Ford (NYSE: F  ) , which rode right over Wall Street's $0.37 earnings-per-share expectations with a $0.45-per-share profit and bumped up its full-year guidance on the heels of stabilizing European sales and rapid growth in Asia. This quarter represented the first combined profit outside of North America in nine quarters. Ford saw its market share improve to 4.3% by quarter's end in China and delivered wholesale revenue growth of 16%. Ford's mixture of sleek styling, reasonable pricing, and fuel-efficient EcoBoost engines is really clicking with consumers around the world. With an incredible leader at the helm, CEO Alan Mulally, I see no reason why Ford won't continue to motor higher.

Residential real-estate investment trust AvalonBay Communities (NYSE: AVB  ) reported third-quarter results on Wednesday and, like Ford, managed to top expectations. Overall, diluted funds from operations, or FFO -- a measure of residential-REIT performance that excludes property sales and depreciation -- fell to $1.18 per share from $1.44 in the year-ago period but topped expectations by $0.01. More importantly, net FFO to shareholders improved 9.4% to $153.4 million from the prior year. If there was one downside, AvalonBay forecast fourth-quarter FFO of $1.54 to $1.60 per share, which is below the $1.64 Wall Street was expecting. This could be due to the recent drop in lending rates, which are at a four-month low, giving potential home-buyers a reason to buy a home and stop renting. I would still suggest it's only a matter of time before lending rates rise to normalized levels, which should only serve to dramatically boost AvalonBay's pricing power.

Consumer products behemoth Procter & Gamble (NYSE: PG  ) also held the line and met Wall Street's criticisms head-on. For the quarter, P&G delivered revenue growth of 2.2% to $21.2 billion, which topped estimates by about $160 million as organic sales growth jumped 4%. It also managed to hold or improve its market share in two-thirds of its best-selling product categories. On the EPS front, P&G reported $1.05 in adjusted profit, meeting expectations, and once again stood by its forecast for 5% to 7% EPS growth in fiscal 2013. Perhaps the one head-scratcher in P&G's report was the absence of CEO A.G. Lafley on the conference call. Aside from that, it was a solid quarter.

Lighting it up
NextEra Energy
(NYSE: NEE  ) subsidiary Florida Power & Light made waves earlier last week when it successfully completed a test on its first of three natural-gas turbines at the Riviera Beach Next Generation Clean Energy Center. It's a mouthful of a name, but this new $1 billion investment will use a third less fuel per megawatt-hour when completed and will be capable of producing 1,250 megawatts of electricity, which can power up to 250,000 households. The project is set for completion by mid-2014. Although alternative-energy projects are costing NextEra a lot up front, the company will benefit with noticeably lower long-term energy costs than its peers. That, in turn, may actually result in cheaper energy costs for NextEra customers.

Thank you. May I have another?
All eyes may be on Chevron's (NYSE: CVX  ) enormous liquid-natural-gas assets off the coast of Australia, but it was news out of Canada last week that helped to modestly energize shares. Chevron announced late in the week that it had completed exploration of the Duvernay shale in west-central Alberta, Canada, and determined that it could yield 7.5 million cubic feet of natural gas per day, as well as 1,300 barrels of condensate. Ultimately, that's not a lot compared to what Chevron already delivers on an annual basis, but it does speak to the company's global reach.

Back to basics
It was a week of equal gains for both the Basic Needs portfolio and the S&P 500 -- 0.9% each! Key here were solid results from Ford, AvalonBay, and P&G. With the exception of Ford, which is burning rubber, many of these companies aren't meant for double-digit growth. Therefore, any time I see 4% organic sales growth from P&G and 9.4% FFO growth from AvalonBay, I'm very encouraged about the future for these companies. It's still early days for this three-year experiment, but the dividends are rolling in, and these companies have held up well during the market's rare dips. I fully expect the Basic Needs portfolio to handily 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.

Your safest path to getting rich
One of the best aspects of basic-needs stocks is that most pay a dividend -- and dividend stocks can make you rich. While they don't garner the notoriety of highflying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of their quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts identified nine rock-solid dividend stocks in this free report. 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.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2702496, ~/Articles/ArticleHandler.aspx, 9/26/2016 6:36:20 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:01 PM
AVB $182.77 Up +0.66 +0.36%
AvalonBay Communit… CAPS Rating: *
CVX $99.22 Down -0.76 -0.76%
Chevron CAPS Rating: ****
F $12.17 Down -0.01 -0.08%
Ford CAPS Rating: ****
NEE $126.75 Down -1.28 -1.00%
NextEra Energy CAPS Rating: ***
PG $87.76 Down -1.23 -1.38%
Procter and Gamble CAPS Rating: ****