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:
- Waste Management
- Intel
- NextEra Energy
- MasterCard
- Chevron
- Select Medical
- Ford
- American Water Works
- Procter & Gamble
- AvalonBay Communities
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 |
$1,041.85 |
5.2% |
|
Intel |
$23.22 |
42.64 |
$1,058.32 |
6.9% |
|
NextEra Energy |
$87.94 |
11.26 |
$952.93 |
(3.8%) |
|
MasterCard |
$645.57 |
1.53 |
$1,160.46 |
17.5% |
|
Chevron |
$124.95 |
7.93 |
$969.76 |
(2.1%) |
|
Select Medical |
$8.96 |
110.49 |
$951.32 |
(3.9%) |
|
Ford |
$17.50 |
56.57 |
$944.72 |
(4.6%) |
|
American Water Works |
$43.13 |
22.96 |
$947.33 |
(4.3%) |
|
Procter & Gamble |
$81.29 |
12.18 |
$1,029.45 |
4% |
|
AvalonBay Communities |
$133.95 |
7.39 |
$899.36 |
(9.1%) |
|
Cash |
$0.88 | |||
|
Dividends receivable |
$99.03 | |||
|
Total commission |
($100.00) | |||
|
Original investment |
$10,000.00 | |||
|
Total portfolio value |
$10,055.41 |
0.6% | ||
|
S&P 500 performance |
5.6% | |||
|
Performance relative to S&P 500 |
(5%) |
Source: Yahoo! Finance, author's calculations.
Mixed reviews
If there was a prevalent story that stood out this week in the Basic Needs portfolio, it was of analyst actions that sent two stocks careening in opposite directions.
Citigroup upgraded chipmaker Intel (INTC +0.30%) to buy from neutral late in the week, noting that it believes corporate personal computer demand has stabilized and that consumers-side weakness in PC sales has been more than forecast into Intel's full-year projections. Despite the upgrade, Citi kept its price target on Intel unchanged at $28. I continue to believe that Intel is set up to become a dominant force in cloud hardware and should be able to muscle its way into the tablet processor market over time. With its legacy PC cash flow still fueling an impressive dividend, I'd say Intel looks just as attractive as it did the day it was selected.
On the flip side, hospital and outpatient rehabilitation clinic operator Select Medical (SEM +0.13%) received a downgrade to "strong sell" from research firm Zacks, which cited a recently mixed earnings report that led to lower year-over-year operating cash flow. However, I would suggest largely ignoring this short-term analysis and instead focus on the long-term cost-cutting and operational improvements that Select Medical is enacting that, in combination with Obamacare, should help drive profits higher.
Show me the money!
It wouldn't be a proper week in the Basic Needs portfolio if we didn't have dividend news to report. Although we received no payments this week, we did see refuse and recycling giant Waste Management (WM +2.98%) go ex-dividend with what will be a $0.365-per-share payout to be received on Dec. 20, 2013. Waste Management has consistently boosted its dividend for 10 straight years, with strength in its refuse pricing operations providing most of that kick. Although its recycling business is still weak due to unfavorable metal prices, I'd suggest that another dividend increase could be announced as early as this month.
Driving over the competition
In addition to unveiling its next-generation Mustang last week, Ford (F 2.22%) on Tuesday announced solid auto retail sales for November. Retail sales rose 9%, while unit sales gained 7%, producing the best November in nine years. Fuel-efficient passenger cars such as the Fusion and Fiesta saw the most impressive unit sale gains of 51% and 26%, respectively, while the automaker's truck category saw gains of 17%. With Ford's perfect blend of fresh styling, reasonable price points, and improved fuel efficiency, I see nothing but positive growth prospects moving forward.
More delays
Finally, the bad news continues for integrated oil and gas giant Chevron (NYSE: CVX), which looks to face more delays in its $6.4 billion Chuandongbei gas project in China, according to Reuters. Chevron and partner PetroChina have not come to terms on how best to retrieve natural gas from their joint asset. Furthermore, Chevron was forced to temporarily suspend exploration activities in Romania due to fear for workers' safety during protests against fracking. As of yesterday, the exploration activities had recommenced, but the situation serves as a reminder that geopolitical forces can still weigh heavily on commodity-based stocks.
Back to basics
It was a complete wash of a week, with the Basic Needs portfolio and S&P 500 both finishing flat. As we coast toward the end of the year I wouldn't expect to see any major moves and am instead looking forward to receiving more steady dividends and allowing these 10 cash flow kings to work their magic in 2014 and beyond.
