Did you know the average price-earnings (P/E) ratio of all stocks in the S&P/ASX 200 (INDEX^: AXJO) (ASX: XJO) is almost 15?
Whilst that isn't too expensive based on historical measures, it also means Australia's top 200 stocks aren't exactly cheap either.
So perhaps now more than ever investors should be checking, and re-checking, to make sure their portfolio is well diversified, in order to mitigate downside risks.
Having a mixture of stocks of different sizes and risk profiles which operate across various geographies and industries is a must.
Here are four stocks I'd buy if I were looking to diversify my personal portfolio…
- Computershare Limited (ASX: CPU) is the $6.4 billion company which connects shareholders and the companies they invest in. The company has global exposure and although shares may appear expensive using a simple P/E ratio, it's a strong defensive business and is expected to grow earnings modestly in coming years. Computershare will also benefit from a falling Australian dollar and rising US interest rates.
- Slater & Gordon Limited (ASX: SGH) is Australia's premier law firm and has recently begun its expansion into the UK – a market five times larger than ours. Leveraging off its local success, I am willing to bet it will, over the ultra-long term, be a much stronger and profitable company than it is today. With a payout ratio of just 25%, dividends can also be expected to rise over time.
- Coca-Cola Amatil Ltd (ASX: CCL) is the bottler and distributor of Coca-Cola branded products across Australia, Indonesia and four other countries. It is also the exclusive distributor of Beam alcoholic beverages. With its share price taking a beating over the past year and an operational review now complete (which included a large investment from parent, The Coca-Cola Company) it presents as a compelling buy to hold opportunity.
- Credit Corp Group Limited (ASX: CCP) is Australia's largest receivables management (debt collection) firm. The $500 million company has witnessed its share price jump from around $2.50 to $10.80 in just five years. Although growth may be more modest in coming years, it certainly isn't lacking in potential. Especially with a US expansion underway. It pays a 3.7% fully franked dividend.
I already own three of these stocks (see my disclosure below) for their defensive, long-term, growth and income characteristics. If you also like the look of the above stocks, you'll love the three best stock ideas our top analysts have just uncovered…
