When it comes to individual stocks it is so often easy to get pulled into investing in a few companies that hold great promise but volatile price action. Perhaps you like the product or perhaps your neighbor told you it's going to be the next big winner. Whether or not the investment is one that truly is sound, it's always important to remind oneself that the overarching goal of investing is to protect oneself from inflationary forces. Whereas speculation has its place in the excitement of investing, stability should always remain the backbone of the portfolio. Having a core holding to have confidence in is one of the safest ways to stay the course in any investing strategy. At the end of the day, few can truly be dissatisfied from putting their money to work in order to create a steady long-term gain.
To accomplish such stability, the core investments in one's portfolio should include a certain criteria:
- Leadership. Companies that have risen to the top of their respective industries have accomplished the capabilities to sustain themselves in the worse of environments. They have economies of scale and the brand recognition that often allows them to sustain lasting operations.
- Growing Dividend. Companies that have a steady history of increasing their dividends have a friendly attitude towards their shareholders and a willingness to return value. Dividend growth can attract greater investment and often serves as a measure of strengthening operations.
- Beta < 1. Companies that have a Beta of less than one statistically tend to be less volatile in regards to the overarching market.
- Diversified Investments. Maintaining a portfolio that incorporates parts of the economy that operate independently from each other is a proven method to mitigate the damage from sector-specific volatility.
The following five companies when added together make for a strong core holding in any portfolio. As stable enterprises in unique economic sectors, the portfolio balances overall stability with growth industries. Above all, each company has a proven track record for growing their dividends yields as noted in the picture below. All values were taken as of April 22, 2012.
|Company||Market Cap.||Beta||Fwd. Yield||Industry|
|Teva Pharmaceutical Industries (TEVA)||$40 Billion||0.55||2.37%||Generic Drugs|
|Waste Management (WM)||$17 Billion||0.63||3.9%||Waste Disposal|
|Chevron (CVX)||$203 Billion||0.86||3.2%||Oil & Gas|
|Proctor & Gamble (PG)||$186 Billion||0.35||3.3%||Personal Care|
|Intel Corporation (INTC)||$138 Billion||0.96||3.0%||Semiconductors|
Teva capitalizes on an aging population that will be seeking more drugs that are coming off patent protection. Waste Management operates in a secure industry on the brink of finding greener solutions to further turn trash into dollars. Chevron is a giant capitalizing on an almost inevitable rising oil trend. Proctor & Gamble is a defensive addition to the portfolio as a company that makes a significant portion of the average consumer's trusted brands when it comes to personal care products. Intel Corporation is a leading chip maker who's recent acquisition of McAfee opens the door towards a hardware approach in digital security.