The Basic Needs Portfolio

The Basic Needs Portfolio

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 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, 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 following portfolio components:

Let's look at how our portfolio of basic needs stocks fared this week.


Cost Basis


Total Value


Waste Management










NextEra Energy















Select Medical










American Water Works





Procter & Gamble





AvalonBay Communities







Dividends receivable


Total commission


Original investment


S&P 500 performance


Performance relative to S&P 500


Sources: Yahoo! Finance, author's calculations.

As has been the case in previous weeks, with many big-profile names in the Basic Needs Portfolio you get a wide variance in news stories. Here are five that caught my attention this week.

Analyst actions
Last week we were talking about Intel being downgraded by R.W. Baird to "neutral." This week it's the exact opposite, with Piper Jaffray upgrading Intel to "neutral" from "underweight" and setting a $22 price target on shares. It still should be noted that Piper Jaffray's target is below where Intel is trading currently, so it's not particularly optimistic on the company, but it does see Intel's potential to win decent market share in tablets as enough reason to issue an upgrade. Between cloud computing, tablet wins, and its ongoing cash cow that is the PC microprocessor market, Intel remains one of the most attractive long-term buy-and-hold stocks in the tech sector.

Dividend news
On Thursday, refuse service provider Waste Managementdeclared a quarterly dividend of $0.365 (the same as in the previous quarter) that will be payable on Sept. 20 to shareholders on record as of Sept. 6. It's not shocking to see Waste Management keep its dividend steady, since its increases are usually announced in the fourth quarter. In addition, metal prices have been weak, which has put a slight damper on Waste Management's recycling business. Nonetheless, shareholders are currently enjoying a 3.5% annual yield.

Also in the news
Shares of payment processor MasterCard and Visa received a slight boost this week, after the Federal Reserve announced an appeal to a court ruling that overturned a $0.21 cap on fees charged to retail stores for debit-card transactions. Right now both companies can charge fees of as much as $0.50 for debit-card transactions, and an overturn would certainly work in the favor of MasterCard and Visa. The good news (for this portfolio) is that even if the fees stick, Visa has a much larger percentage of debit-card market share in the U.S., so it would feel the brunt of the pain relative to MasterCard.

Shareholders in Chevron received some potentially optimistic news on Friday, with Pemex, the world's fifth-largest producer of crude in Mexico, reporting its lowest monthly oil production in approximately 18 years. On the heels of nine straight years of declining production, Mexican President Enrique Pena Nieto earlier this month introduced a bill that would allow for private companies like Chevron to be able to enter the currently government-run oil industry in Mexico. Chevron is always looking for ways to expand its asset base and improve the U.S. oil import picture, and this could be just another piece to that puzzle.

Finally, shareholders of Procter & Gamble have to be a bit miffed after finding out that recently departed CEO Bob McDonald made $15.9 million in total compensation last year -- a 5% raise over the previous year. Many have praised the return of A.G. Lafley, who has been largely credited with building value in P&G's core brands, while Bob McDonald spent heavily on advertising only to see minimal sales improvement. Hopefully this is the last time we have to be sidetracked by Bob McDonald's unmemorable run as CEO and can instead focus on P&G's push into international markets.

Back to basics
It was a pretty flat week overall this week, with the Basic Needs Portfolio slightly outpacing the modest gains by the S&P 500. As a reminder, we now have six stocks in this portfolio set to pay out a dividend between Aug. 30 and Sept. 20, so keep that in mind when you compare the slight underperformance in this group of stocks relative to the S&P 500 thus far. This portfolio is set up to help you sleep at night while earning solid dividend income and outperforming in any market. Over the next three years, I expect double-digit outperformance.

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

If there's one thing you'll notice about basic-needs stocks, it's that most pay a dividend -- and dividend stocks can make you rich. It's as simple as that. While they don't garner the notability of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

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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, Visa, 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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Originally published