Ford Unveils Its New F-150 While Intel Whiffs in Q4

A three-year-long experiment intent on showing that life's most basic needs can result in market-beating portfolio gains, hefty dividend income, and a good night's sleep!

Jan 20, 2014 at 1:31PM

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 markets and bear markets, as well as their 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.

Company

Cost Basis

Shares

Total Value

Return

Waste Management 

$42.60

23.24

$1,002.11

1.2%

Intel

$23.22

42.64

$1,102.24

11.3%

NextEra Energy

$87.94

11.26

$987.05

(0.3%)

MasterCard 

$645.57

1.53

$1,252.18

26.8%

Chevron 

$124.95

7.93

$945.97

(4.5%)

Select Medical 

$8.96

110.49

$1,264.01

27.7%

Ford

$17.50

56.57

$934.54

(5.6%)

American Water Works

$43.13

22.96

$953.53

(3.7%)

Procter & Gamble

$81.29

12.18

$972.94

(1.7%)

AvalonBay Communities

$133.95

7.39

$900.69

(9%)

Cash

   

$0.88

 

Dividends receivable

   

$130.78

 

Total commission

   

($100.00)

 

Original Investment

   

$10,000.00

 

Total portfolio value

   

$10,446.92

4.5%

S&P 500 performance

     

7.5%

Performance relative to S&P 500

     

(3%)

Sources: Yahoo! Finance, author's calculations.

Show me the money!
I may say this often, but the best part of owning Basic Needs companies is the fact that they generate consistent cash flow which can then be used to pay impressive dividends to shareholders. This week we received one payment and had another dividend stalwart announce its next quarterly payout.

Putting a little extra money in our pockets this week was residential real estate investment trust AvalonBay Communities (NYSE:AVB), which rewarded shareholders with $1.07 per share as of Wednesday. AvalonBay shares have taken a bit of a hit in recent months because interest rates stopped moving higher. Higher interest rates tend to push on-the fence homebuyers back into renting, which in turn gives AvalonBay stronger pricing power and helps lower its vacancy rate even further. As the Federal Reserve continues to scale back on its economic stimulus known as QE3 I would only expect AvalonBay's pricing power, and perhaps dividend, to improve.

Also, on Tuesday, consumer-goods giant Procter & Gamble (NYSE:PG), the company behind household brands such as Tide detergent and Crest toothpaste, announced a quarterly dividend of $0.6015, matching its previous quarterly payout. This stipend will be paid out to shareholders on Feb. 18 who are on record as of Jan. 24. Given that Procter & Gamble has a 56-year streak of raising its dividend, I would be shocked if it didn't boost its dividend in 2014. For now, shareholders can sit back and enjoy the 3% yield.

Things are getting chippy
Chipmaking giant Intel (NASDAQ:INTC) reported its fourth-quarter results on Thursday, and all things considered, it was another wash of a quarter. Revenue jumped 3% to $13.83 billion as profit climbed 6% to an adjusted $0.51 in EPS; however, that was $0.01 shy of estimates. Looking ahead, Intel's forecast calls for essentially flat revenue growth as it continues to be hurt by a decline in PC sales. Its bottom-line is also feeling the pain, as it's being forced to spend heavily on research and development to have a next-generation product lineup that will be competitive. In addition, Intel announced on Friday a 5% global workforce reduction, which will help counteract those rising R&D costs. While its near-term results may suffer a bit, the long term remains bright for Intel.

The future is bright
On Thursday, the alternative-energy kingpin of the electric utility industry, NextEra Energy (NYSE:NEE), announced that it began commercial operations of its 20 MW Mountain View solar energy project in North Las Vegas for NV Energy, which is in the process of being purchased by Berkshire Hathaway. The cost of solar and wind projects can be pretty steep upfront; however, NextEra's long-term costs should be significantly lower than its fossil fuel-dependent electric utility counterparts, giving it a comparative advantage that could last a decade or longer.

Have you driven a new Ford lately?
Last, but certainly not least, Ford (NYSE:F) unveiled its completely redesigned F-150, its top-selling vehicle, to the world this past week. The all-new F-150 will feature the company's 2.7-liter EcoBoost engine, which improves fuel efficiency but, thanks to superchargers, doesn't sacrifice power. In addition, as Fool automotive expert Dan Miller points out, the F-150 will feature significantly more aluminum and a great amount of high-strength steel to lighten, yet strengthen, its frame. It remains to be seen whether car buyers and F-150 enthusiasts will approve of these changes, but it's tough to see Ford failing, given its innumerable success over the past couple of years.

Back to basics
Whereas this portfolio lost a bit of ground last week, big gains from Ford and Select Medical helped easily outperform the S&P 500 for the week. Even though we're down 3% in the early going, this portfolio was built to generate significant cash flow and healthy dividends, which should push it well ahead of the S&P 500 once our three-year experiment is up.

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

Wall Street's greatest secret, revealed!
One of the dirty secrets that few finance professionals will openly admit is that dividend stocks as a group handily outperform their non-dividend-paying brethren. But knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

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 Berkshire Hathaway, Ford, Intel, MasterCard, and Waste Management. It also recommends Chevron and Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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