Ford Floors It, Intel Unveils New Products, and Select Medical Gets an Obamacare Bump

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!

Apr 7, 2014 at 6:05PM

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 has fared since we began this experiment.

Company

Cost Basis

Shares

Total Value

Return

Waste Management 

$42.60

23.24

$972.13

(1.8%)

Intel

$23.22

42.64

$1,115.46

12.7%

NextEra Energy

$87.94

11.26

$1,069.81

8%

MasterCard

$64.557

15.30

$1,104.35

11.8%

Chevron 

$124.95

7.93

$942.08

(4.9%)

Select Medical

$8.96

110.49

$1,391.07

40.5%

Ford

$17.50

56.57

$912.47

(7.8%)

American Water Works 

$43.13

22.96

$1,051.34

6.2%

Procter & Gamble 

$81.29

12.18

$971.60

(1.9%)

AvalonBay Communities 

$133.95

7.39

$986.05

(0.4%)

Cash

   

$0.88

 

Dividends receivable

   

$198.74

 

Total commission

   

($100.00)

 

Original Investment

   

$10,000.00

 

Total portfolio value

   

$10,715.98

7.2%

S&P 500 performance

     

9.1%

Performance relative to S&P 500

     

(1.9%)

Source: Yahoo! Finance, author's calculations.

For the week, the Basic Needs portfolio handily outperformed the market, which was spooked by weaker-than-expected jobs data on Friday, as well as the threat of how rising interest rates may impact the housing industry. While I'm pleased this portfolio gained even more ground on the S&P 500, it wasn't designed to compete on a weekly basis, but rather to outperform the index over the long haul. To that end, I believe it's still perfectly on track.

I don't get to say this very often with regard to the Basic Needs portfolio, but there wasn't a shred of dividend news this week, leaving us to focus on five separate news-driven events.

Burning rubber
I've said it once, and I'll say it again: Ford (NYSE:F) is on fire! On Tuesday, the domestic automaker reported its best March sales figures in eight years with 244,167 vehicles sold, up 3% from a year ago. In particular, Ford pointed to a 9% increase in Ford Fusion sales, while its Ford F-Series pickups rose 5% to top the 70,000 vehicles sold mark. Put another way, this was the best March for F-Series pickup sales in six years. Even Lincoln outperformed, with total sales up 31% as Ford continues its luxury-brand rebuild and targets a more diverse audience. With the bulk of Ford's bread-and-butter vehicles demonstrating higher sales year over year -- including its halo car, the Mustang -- I'd say investors are still largely underestimating Ford's potential moving forward. 

Showing off its wares
Chipmaker Intel (NASDAQ:INTC) had a subtly strong week following a press release on Tuesday that outlined its plans to establish the Intel Smart Device Innovation Center in Shenzhen, China. The center will be funded by a $100 million investment from Intel. As further proof of the company's expected innovative success, Intel CEO Brian Krzanich debuted a number of new devices, including its Intel Gateway Solution for the Internet of Things, using the company's Atom and Quark processors. He also demonstrated a live call using China Mobile's TD-LTE network and Intel's XMM 7260 LTE advanced platform. Innovation will be the key to Intel's success over the coming years, and although the cost to achieve that success may seem high now, it will be well worth it over the long run.

Landing the elephant
Based on share price alone, it was a rough week for MasterCard (NYSE:MA) shareholders. However, it wasn't all bad news. On Friday, we discovered that retail kingpin Wal-Mart had ended its nine-year payment-processing relationship with Discover Financial Services and will go with MasterCard as its new payment facilitator. The deal encompasses both Wal-Mart and Sam's Club locations and brings in potentially millions of new members into MasterCard's network. With MasterCard fully exploiting its prepaid debit-card opportunity in the U.S., landing elephants like Wal-Mart, and looking poised to grow by double digits overseas for perhaps the next couple of decades, I believe there's still plenty of upside left for this stock.

The winds of change are blowing
When midnight struck on New Year's Eve, roughly 55 federal tax breaks expired. ax breaks expire on a yearly basis, so this is nothing too new, but some of these breaks are considered important from a consumer and business perspective. According a report by Bloomberg last week, Congress may be nearing an agreement to reinstate a number of these tax breaks, including one that would give preferential tax treatment for the use of wind power. This is positive news for electric utility NextEra Energy (NYSE:NEE), which is setting the example for everyone else by generating well in excess of 10,000 megawatts of energy from wind power alone. NextEra's alternative-energy investments haven't been cheap, but over the next decade its electric cost advantage will stand head and shoulders above its peers.

The Obamacare bump
Finally, in more macro news, hospital and outpatient rehabilitation center operator Select Medical (NYSE:SEM) hit a fresh 52-week high after the Centers for Medicare and Medicaid Services announced that Obamacare enrollments had surpassed 7 million before the March 31 insurance open enriollment cutoff for 2014. This is great news for hospital operators such as Select Medical, which hope that more people insured through Medicare and Obamacare will lead to fewer doubtful collection write-offs. If that becomes the case, hospital operators like Select Medical could produce bigger profits, see their dividends increase, or simply could choose to reinvest in better health-care equipment to stand out from the competition.

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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 owns shares of China Mobile and Discover Financial Services, as well as recommends Chevron and Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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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