Starting out in the stock market is daunting enough but one of the hardest things about it is finding quality stocks to buy. Thanks to some friends and a number of free online publications, such as The Motley Fool's Take Stock email, I was able to get some great ideas.
However, I still made my fair share of investing mistakes with some costing me in excess of $5,000. Believe me when you don't have much in your portfolio, that type of loss can be devastating.
Fortunately, I've learnt from my mistakes and want to help new investors avoid doing what I did. If I were starting again today, with $20,000 to invest, these are the stocks I'd buy.
Core stocks
- BHP Billiton Limited (ASX: BHP) is Australia's biggest company and most diversified resources stock. It is focused on four key commodities, namely copper, coal, petroleum and iron ore. What's more, it is expected to grow its dividend in the coming year. I'd spend $4,000 of my $20,000 on BHP shares.
- Rio Tinto Limited (ASX: RIO) is our other big mining stock. However over 90% of its earnings come from iron ore alone. In the next decade I believe we're likely to witness further cost cutting, reductions in capex and a stronger push into other commodities such as copper and aluminium. I'd allocate $3,500 to Rio.
- Coca-Cola Amatil Ltd (ASX: CCL) is the exclusive bottler and distributor of Coca-Cola products to Australia, Indonesia, New Zealand and more. A recent price war with rival Schweppes (among other things) has led to a falling CCA share price, offering investors a discounted entry point. I'd allocate $3,500 to CCA shares.
- QBE Insurance Group Ltd (ASX: QBE) is one of Australia's biggest insurance groups. Unfortunately for shareholders its foreign exposure has led to massive swings in earnings and resulted in its share price falling heavily over the past five years. However, with a long-term horizon, I see QBE becoming a more efficient and profitable organisation. I'd spend $2,000 on its shares.
Growth stocks
- Slater & Gordon Limited (ASX: SGH) recently announced a stellar profit result which has sent it share price flying higher. Its UK expansion is tracking along very nicely and provides significant upside potential at today's share price. $3,500 would go towards its shares.
- Cash Converters International Ltd (ASX: CCV) is the last stock on my buy list for new investors. It's currently growing its branch network worldwide, nurturing its exciting Carboodle business to profitability and expanding its payday loans business. I'd buy $3,500 worth of its shares.
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