In May, I announced my intention to create a portfolio that embodied life’s basic needs. Understandably, many of the truly basic needs in our everyday lives have transcended far beyond just the need for water and shelter. To that end, over a period of 10 weeks I detailed 10 diverse companies that I feel 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, and command incredible pricing power in nearly any economic environment.
If you’d like a closer look at what my reasoning was behind each selection, you can do so by clicking on any, or all, of the portfolio components below:
1). Waste Management
2). Intel
3). NextEra Energy
4). MasterCard
5). Chevron
6). Select Medical
7). Ford
8). American Water Works
9). Procter & Gamble
10). AvalonBay Communities
Let’s take a look at how our portfolio of basic needs stocks fared this week:
| Company | Cost Basis | Shares | Total Value | Return |
|---|---|---|---|---|
| Waste Management | $42.60 | 23.24 | $1,003.97 | 1.4% |
| Intel Corporation (NASDAQ:INTC) | $23.22 | 42.64 | $959.83 | (3.1%) |
| NextEra Energy | $87.94 | 11.26 | $971.29 | (1.9%) |
| MasterCard | $645.57 | 1.53 | $976.08 | (1.2%) |
| Chevron | $124.95 | 7.93 | $971.43 | (2%) |
| Select Medical Holdings Corporation (NYSE:SEM) | $8.96 | 110.49 | $994.41 | 0.4% |
| Ford Motor Company (NYSE:F) | $17.50 | 56.57 | $962.65 | (2.7%) |
| American Water Works Co., Inc. (NYSE:AWK) | $43.13 | 22.96 | $991.18 | 0.1% |
| Procter & Gamble | $81.29 | 12.18 | $994.38 | 0.4% |
| AvalonBay Communities Inc (NYSE:AVB) | $133.95 | 7.39 | $983.76 | (0.6%) |
| Cash | $0.88 | |||
| Dividends receivable | $0 | |||
| Total commission | ($100.00) | |||
| Original investment | $10,000.00 | |||
| Total portfolio value | $9,809.86 | (1.9%) | ||
| S&P 500 performance | (1.1%) | |||
| Performance relative to S&P 500 | (0.8%) |
Source: Yahoo! Finance.
Dividend news this week
Ford Motor Company (NYSE:F) announced in mid-July that it would be paying out a $0.10 quarterly dividend on Sept. 3 for shareholders on record as of Aug. 2. With Alan Mulally’s focus on international sales and fuel-efficient engines going so well, Ford Motor Company (NYSE:F) doubled its dividend to $0.10 per quarter from $0.05 per quarter earlier this year, restoring the company to its pre-recession payout levels.
Intel Corporation (NASDAQ:INTC), on the other hand, declared a quarterly stipend of $0.225 per share in late July, payable to shareholders on Sept. 1 who are on record as of Aug. 7. Intel Corporation (NASDAQ:INTC)’s business growth has been put into question because of the proliferation of smartphones and tablets, which have pressured legacy PC sales. While still generating significant cash flow from its dominant microprocessor position in PCs, Intel Corporation (NASDAQ:INTC) is doing what it can to reinvest in cloud-computing hardware and mobile processing innovations for the future.
Earnings news this week
Perhaps this week’s most surprising earnings report came from the market-cap midget of this portfolio, hospital operator Select Medical Holdings Corporation (NYSE:SEM). For the second quarter, Select Medical Holdings Corporation (NYSE:SEM) saw its revenue improve roughly 1% to $756.7 million as net operating income fell by nearly 6% to $88.3 million. The company’s specialty hospital segment saw revenue increase by just 0.4% and EBITDA fall 5.7% while its outpatient rehabilitation operations delivered gains on both fronts. The truly exciting part was that Select Medical Holdings Corporation (NYSE:SEM)’s adjusted profit of $0.27 per share topped EPS expectations of $0.24 by Wall Street and it backed its previously issued full-year revenue forecast. The company also declared a $0.10 quarterly dividend payable on Aug. 30 for shareholders on record as of Aug. 20.
Water utility provider American Water Works Co., Inc. (NYSE:AWK) also delivered solid second-quarter results this week. For the quarter, American Water Works delivered a 3% decrease in revenue to $724 million as EPS declined to $0.57 from $0.66 in the year-ago period. This may not seem like great news, but the decline in revenue and profit primarily relates to abnormally hot weather that led to drought conditions throughout much of the U.S. at this time last year. If it’s any consolation, American Water Works stood by its full-year EPS forecast of $2.15 to $2.25 and plans to pay out a $0.28 per share dividend to shareholders on Sept. 3.
Other news
Finally, according to a Bloomberg report, residential-REIT AvalonBay Communities Inc (NYSE:AVB) and Equity Residential could be looking to sell off or spin into an IPO its DeWAG Management German properties that were acquired when the two combined to purchase Archstone last year. DeWAG represents a non-core asset for both companies and a sale or IPO would help generate cash that both companies can use to pay down debt or accelerate the opening or building of new communities. Neither company would comment on these rumors, but it would be a logical next step.
Back to basics
Having completed our first week of trading, I have to say I’m quite impressed with the performance of this portfolio so far. Sure, it lost value this week on a nominal basis, but it lost a bit less than the S&P 500 did, thus outperforming the index for the week. The premise of this portfolio is that it’ll outperform in pretty much any economic environment, and this past week could be the beginning of what I suspect will be a three-year trend of outperformance.
Check back next week for the latest update on this portfolio and its 10 components.
The article The Basic Needs Portfolio originally appeared on Fool.com and is written by Sean Williams.
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, Ford, Intel, MasterCard, and Waste Management. It also recommends Chevron and Procter & Gamble.
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