Portfolio diversification is very important for long term investors. However, over-diversification can be a bad thing. Investment gurus like Charlie Munger have talked about “de-worst-ification” in the past. The idea that it is not necessary to spread money evenly on a basket of stocks, rather than betting big on those with high-conviction bets, is a good idea when looking to beat the market.
That said, choosing a few high-quality baskets and putting most of your eggs in those baskets is a winning strategy. In this article, I’m going to describe three such baskets that long-term investors can consider today.
Accordingly, let’s dive into it!
It is always a good idea to add a Dividend Aristocrat to an investment portfolio. companies like fortis (TSX: FTS)(NYSE:FTS) more than just prove your worth in providing stable and consistent long term returns. And it should come as no surprise to many investors that a significant portion of this return comes through dividends.
When one looks at Fortis’ dividend yield, one might not see why. After all, Fortis only has returns of 3.7% at the time of writing.
However, Fortis’ dividend-growth track record gets most investors excited by this name. The company’s track record of raising dividends for nearly five decades motivates investors to hold this stock. Accordingly, Fortis’ commitment to continuing to grow its dividend by the high single digits in the coming years makes this stock one to buy and hold for the long term.
In this low interest rate environment, bonds such as Fortis provide more robust returns for proxy investors. Indeed, with the growth-to-value rotation, I see more near-medium-term upside for this stock.
However, Fortis remains my top pick in the long term. This is a high quality option for any long-term investor seeking reliable total returns.
Couch-Turd Food (TSX:ATD.B) is a global player in the gas station and convenience store space. I know – it’s not necessarily the most glamorous of businesses out there.
Why should investors own a couch-tard stock, say, a sexy tech stock?
Well, the company’s historical long-term growth trajectory rivals some of the best tech stocks. The company did this through a growth-by-acquisition strategy, which provided investors with tech-like returns in a more stable sector.
Of course, the pandemic has provided significant headwinds for couch-tard investors of late. However, for optimists who believe the worst of this pandemic is over, the couch-tard retains a spot as one of the top pandemic replays.
I see Couch-Tard as a reliable long-term cash flow-generating machine. It has the core portfolio holding potential for all long-term investors today.
Okay, now for a top development pick in technology. in Canada, Constellation Software (TSX: CSU) Has been one of my top picks in this regard.
Similar to Couch-Tard, Constellation has grown through acquisitions over the years. However, this company’s focus on acquiring software offers higher leverage for long-term growth than Couch-Tard — or many of its tech peers, for that matter.
Indeed, the company’s cash flow growth and return on capital invested is some of the best in class. It is a long-term growth investor’s dream stock and is currently trading around 10% from its all-time highs.
These three picks make for an exciting, yet stable long-term portfolio for investors. I highly recommend that investors consider each of these stocks individually, although all three make for great diversity in today’s difficult-to-navigate market.
Like these top picks? Here are 10 more that I think investors need to check out right now!
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This article represents the opinion of the author, who may disagree with the status of an “official” recommendation of Motley Fool Premium Service or Advisor. We are motley! Questioning an investment thesis – even our own – helps us all to think critically about investments and make decisions that help us become smart, happy and prosperous, so We occasionally publish articles that may not conform to recommendations, rankings or other content.
silly contributor Chris McDonald Have no position in any of the stocks mentioned. The Motley Fool owns shares in and recommends Elementation Couch-Tard Inc. and Constellation Software. The Motley Fool recommends Fortis Inc.
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