Portfolio construction is an important consideration for investors and something which if done badly, can lead to significant, unnecessary losses. For example, a portfolio consisting of the 4 major banks, plus the 2 main second tier banks, may diversify away some company specific risk by owning 6 different companies, but it doesn’t diversify your portfolio from industry specific risk.
One way of building a diversified portfolio, is to try to search for companies with certain appealing investment attributes. Here are five stocks selected for five different reasons:
Contrarian – With the stock price having fallen 33% in the past year, Treasury Wine Estates Ltd (ASX: TWE) could certainly be described as being on the nose with investors. The recent release of wines under the Penfolds brand and rumours of an approach from Pernod Ricard, could be the catalyst that this stock needs.
Defensive – When it comes to solid and reliable cash flows, they don’t get much better than owning infrastructure businesses. Toll road operator Transurban Group (ASX: TCL) has been swooping on assets recently, to expand its operations and with the tailwind of a growing population, this stock should continue to provide reliable cash flows for investors.
GARP – Growth at a reasonable price (or GARP) refers to paying up, but not overpaying for a stock with decent growth prospects. Global health and safety protection manufacturer Ansell Limited (ASX: ANN), looks to fit the bill. With the stock trading on a forward price-to-earnings ratio of 15.2, the price looks reasonable – considering the quality and growth potential of the company.
Growth – Implantable hearing device maker Cochlear Limited’s (ASX: COH) share price took a hit, after investors became nervous about its near term growth rates. Short term issues aside, the firm’s long-term growth potential appears intact.
Dividend Yield – With a forecast fully franked dividend yield of 5.1%, wagering and lotteries operator Tatts Group Limited (ASX: TTS), is an appealing income stock that may possess better growth potential, than perennial favourite Telstra Corporation Ltd (ASX: TLS).