For the average share market investor, diversification is essential. Especially at current market prices.
That can mean having a collection of solid companies in the S&P/ASX 200 (INDEX^: AXJO) (ASX: XJO), coupled with some smaller growth companies and a holding of cash to capitalise on any market setbacks. It can also mean holding a select number of companies from the resources, technology, industrial and financial sectors.
It's important to realise that diversification does not stop volatility. However, it helps us avoid getting hit too hard from any specific headwinds facing one particular industry, or even when we've made a mistake.
With that in mind, here are four stocks I'd consider buying if I were a new investor entering the market and was looking to diversify my portfolio.
1. Computershare Limited (ASX: CPU) is the $6.9 billion company between shareholders and the companies they invest into. 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. It will also benefit from a falling Australian dollar and rising US interest rates.
2. 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, in 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 grow over time.
3. Coca-Cola Amatil Ltd (ASX: CCL) is Australia's, Indonesia's and four neighbouring countries' bottler and distributor of Coca-Cola branded products. 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.
4. Senex Energy Ltd (ASX: SXY) is a mid-tier oil and gas producer with operations in the Cooper Basin. I like the company because it holds substantial 2P reserves and projects are close to infrastructure, meaning it'll likely continue to keep costs low whilst ramping up production. The share price has fallen hard in recent times, providing a good entry point for long-term investors.
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