The Everyday Portfolio

As investors look back on years past, I thought I'd take the time to re-emphasize the point I made in my very first article for Investopedia back in February 2008. In it, I suggest investors go with what they know - companies whose products you use everyday. After all, if it was good enough for Peter Lynch, it should be good enough for you. (For more about this concept, read Invest Like Peter Lynch Every Day.)

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In my February 12, 2008 article I recommended three stocks to investors: Pepsi (NYSE:PEP), Columbia Sportswear (Nasdaq:COLM) and Whirlpool (NYSE:WHR). Why these? Because I drink Tropicana orange juice daily, wear a Columbia jacket every day in winter and regularly use a Kitchen Aid blender for smoothies. It's not called "everyday investing" for nothing. How have these stocks performed in comparison to the S&P 500? All three beat it by at least 820 basis points. Meanwhile, in slightly less than two years, the index lost 18% - almost one-fifth of its value.

Are you still doubtful that it pays to invest in what you know? I'll go one step further. I'll take five stocks whose products I currently use everyday and look at their returns for the decade. You won't be disappointed.

Five Everyday Stocks 1999-2009

Company	Product	Annualized Return
Starbucks (Nasdaq:SBUX)	Pike Place Drip Coffee	13.97%
Colgate-Palmolive (NYSE:CL)	Max Fresh Cool Mint Toothpaste	4.51%
Procter & Gamble (NYSE:PG)	Head & Shoulders Shampoo	3.56%
Kellogg (NYSE:K)	Mini Wheats Cereal	8.79%
Hershey\'s (NYSE:HSY)	Twizzlers Nibs Candy	7.67%
S&P 500 Total Return	N/A	-2.80%

$65,000 Difference
If you invested $50,000 in the S&P 500 Total Return Index at the end of 1999, a decade later it would be worth $37,639. However, if you invested $10,000 in each of the five stocks above, you'd have $103,052 - a $65,413 difference. You'd think indexers would be soul-searching at this point, but I'm sure most of them would argue that all of these products have benefited from inflation. However, while the goods produced by these companies may have been subject to more inflation than other products, clearly it is not enough to account for the total difference. But there is an explanation.

A Simple Explanation
Warren Buffett and others often refer to great businesses as having "wide moats," the enviable position where their products possess significant competitive advantages that prevent others from gaining market share. Over time, these wide-moat companies take business from weaker competitors and build an even stronger fortress, impenetrable to most. As a result, earnings consistently grow, generating share price appreciation in good times and bad. This doesn't happen without the everyday use of these companies' products by consumers. However, it's a simple concept very few investors are able to execute over extended periods.

Bottom Line
History tends to repeat itself. Jeremy Siegel's book, "Stocks for the Long Run," points out that for every 10-year period of negative stock returns since 1871, the next decade's average annual return is 10%. Given the S&P 500 has seen negative returns in the most recent decade, don't you think it's time for everyday investing? I do. And the numbers back me up. (For information on finding investment success, read The Successful Investment Journey.)

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