Intel Has a Mixed Quarter, MasterCard Goes Shopping, and Ford Hits the Fast Lane

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 21, 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

$976.78

(1.3%)

Intel

$23.22

42.64

$1,152.99

16.5%

NextEra Energy 

$87.94

11.26

$1,087.60

9.8%

MasterCard

$64.557

15.30

$1,134.19

14.8%

Chevron

$124.95

7.93

$980.78

(1%)

Select Medical

$8.96

110.49

$1,515.92

53.1%

Ford

$17.50

56.57

$905.12

(8.6%)

American Water Works

$43.13

22.96

$1,048.58

5.9%

Procter & Gamble 

$81.29

12.18

$995.84

0.6%

AvalonBay Communities

$133.95

7.39

$987.60

(0.2%)

Cash

   

$0.88

 

Dividends receivable

   

$207.31

 

Total commission

   

($100.00)

 

Original Investment

   

$10,000.00

 

Total portfolio value

   

$10,993.59

9.9%

S&P 500 performance

     

9.1%

Performance relative to S&P 500

     

0.8%

Source: Yahoo! Finance, author's calculations.

It was good news all the way around during the holiday-shortened week, with the S&P 500 up all four days and the Basic Needs portfolio nearly keeping pace. The S&P 500 bested the Basic Needs portfolio by 0.1% ahead of Good Friday, but I'm certainly not going to complain about a whopping 2.8% weekly gain with these generally low-beta stocks.

As has been the case in the past couple weeks we had a significant amount of news-driven events. Per the norm, let's start off with our latest dividend payout.

Show me the money!
No portfolio companies went ex-dividend for the week, but we did receive $1.16 for each share of AvalonBay Communities (NYSE:AVB) that we owned on Tax Day, April 15. This stipend was bumped up 8.4% from the previous payout and speaks to the high occupancy rates and incredible pricing power that community rental property REITs possess at the moment. It's been my position that as the Federal Reserve's quantitative easing effort slowly winds down fewer long-term Treasury purchases might lead to a rise in lending rates. That could further boost residential REIT pricing power as it sends on-the-edge prospective homebuyers back into renting. AvalonBay may not be the best portfolio performer to this point, but I suspect it's soon going to turn that corner.

Can Ford do no wrong?
With the exception of its part in the auto industry's recall mania, can Ford (NYSE:F) do no wrong? On Tuesday, the automaker reported its 10th straight month of sales growth in Europe, where unit sales improved 12% and its market share rose 0.2%, to 8.9%, in March. The company's commercial-vehicle market share rose to an even more robust 10.4%. As Europe's economy continues to stabilize, Ford's fuel-efficient vehicles appear to be attracting quite a bit of attention.  

But that wasn't all. Ford also officially launched its Lincoln line in China in an effort to add geographic diversity to the luxury brand and to attract a rising class of middle and upper-class consumers in the country. Ford announced that Lincoln by 2016 will sell five separate vehicles in China, including the MKZ and the full-size Navigator SUV.  

And let's not forget that Ford also just unveiled its 50th anniversary Mustang, of which only 1,964 will be sold. The Mustang is an icon of the auto industry and Ford's heritage, and the 50th anniversary could generate enough emotional attachment to boost Mustang sales in 2014.

MasterCard goes shopping
For once it was payment facilitator MasterCard (NYSE:MA) and not consumers that went shopping this past week. On Wednesday, MasterCard announced the acquisition of Australia-based Pinpoint, a loyalty and rewards service company to financial institutions in the Asia-Pacific. The move allows MasterCard even more opportunity to reach merchants and customers in a high-growth region. Terms of the deal were not disclosed in MasterCard's press release. Given its recent debt offering, I would look for MasterCard to make a number of deals, or perhaps one large deal, in the coming quarters.

Intel's earnings get chippy
Last week was also the big kickoff to earning season for the Basic Needs portfolio, with chipmaker Intel (NASDAQ:INTC) delivering weaker, but still better-than-expected, first-quarter results. Revenue grew by 1% to $12.8 billion, while earnings per share dipped 5% to $0.38. As per the norm, Intel blamed a slowdown in PC sales for its challenging results, but it also struggled mightily in the mobile realm, winning some victories with tablets but seeing no such luck in smartphones. Fool Ashraf Eassa noted that PC partner Acer is kissing Intel's processors goodbye in its smartphones.

The good news is Intel's forecast for the second quarter was right on track with Wall Street's expectations, and that next-generation cloud hardware sales are strong. In other words, this was another much ado about nothing quarter. As long as Intel's cash flow remains strong there's little reason it's whopper of a dividend won't continue to attract all breeds of investors.

Let's get macro
Lastly, while there was no direct news on integrated oil and gas giant Chevron (NYSE:CVX) last week, it is worth noting that West Texas Intermediate oil prices (with the exception of a two-day pop and drop in March) are at their highest levels since September. Higher prices could mean more pain for Chevron's refineries, but it is great news for the company's much larger exploration and production segment. Chevron is in no way out of the doghouse with shareholders after a couple dismal quarterly reports, but a deal with YPF followed by significantly higher WTI prices may set the company up for an ongoing rebound.

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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 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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