A portfolio of shares should be based on some large, well-managed companies with proven business models and compelling long-term prospects. These ten stocks fit the bill, says Stephen Connolly.
Short-term trading can generate high returns. But it can also be very risky, so it doesn’t make sense to allocate more than a small portion of your equity portfolio to it. What, though, is the best strategy for the rest of the equity allocation if you’re interested in owning shares directly?
A portfolio needs a foundation of solid and dependable assets that can hold their own. These are companies that can be bought and tucked away for the long term, or even for life; they shouldn’t need reviewing on a daily basis. They can easily sit alongside other core investments, such as investment trusts.
Below, I highlight ten such stocks. There’s no particularly scientific selection process. The list that follows is just an attempt to identify companies with proven business models and management for market-beating returns over the long term. They can enhance, de-risk, or even start a sensible portfolio of individual stocks. They are what could be labelled “quality”, and tend to be dominant within their sectors. I have drawn on several different regions and attempted to diversify by industry. Stocks given high values by the market, but without a demonstrably profitable business, have been ignored – so you won’t find Tesla or Uber here, for example. Following tips and one-off recommendations can lead to great gains, but at the same time portfolios can become unbalanced; sometimes too much has been invested in small caps or a particular sector, for example.
It can even be that the companies, while they appear promising, are simply too risky should the economy deteriorate. The stocks below are certainly not immune to economic volatility, but their businesses are generally built on multiple revenue streams, tempering their exposure to the business cycle. They are stocks for all seasons.
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