At some point today England Manager, Roy Hodgson, willname his final 23-man squad forEuro16. Now, it might seem ludicrous (even Foolish) to suggest such a thing, but there are certain similarities to the dilemma faced by Mr Hodgson and that faced by any private investor keen on building a strong, robust portfolio. With this in mind, lets look at a range of companies that could get the thumbs-up from Roy.
Solid defence
Roy might opt for the safe and steady National Grid(LSE:NG) as the foundation of his portfolio. Its predictable earnings and excellent dividend yield (almost 4.5%) make it a safe pair of hands. In defence, Roy will be keen to select companies that build a wall around their profits, have strong brands and lots of repeat customers. Companies such as Unilever, Reckitt Benckiser, Diageo or Imperial Brands are all possible selections here. All have rewarded shareholders handsomely over the years and are likely to continue doing so in the future.
Of course, all investments carry risk so theres always the possibility that some candidatescouldscore own goals (step forwardTesco) orpick up injuries and cut their dividends, such as BHP Billiton. Even worse, like Sports Direct, they may be shown the red card from the FTSE 100. Its therefore essential thatRoy shoots for a diversified portfolio andthoroughly inspects a companysbalance sheet and recent reports forsigns of distress before making his decision.
The best of both worlds?
Ideally, Roys midfield will consist of a combination of players: some experiencedandresilient, others capable of showing a degree of flair. Shifting focus to his portfolio, Roys midfield maycompriseof companies that have demonstrated a commitment to growth while also generating income. Costa Coffee and Premier Inn owner, Whitbread(LSE:WTB) is acompany that has generatedconsistent profits over the last fews years. A dip in recent form shouldnt concern Roy too much. Indeed, on a forecast price-to-earnings (P/E) ratio of 17, the shares are arguably cheap fora company with plans for strong growthoverseas.
Supporting Whitbread could be a company like low-cost carrier, easyJet (LSE: EZ). Its shares currently trade on a P/E of under 10. Although a rise in the price of oil wouldnt be welcome, adividend yield of 4.35% should compensate. While still coming back from injury, Roy might also risk including Aviva. Sure, itsnot the most excitingcompanyto watch but its turnaround is really starting to take shape under the direction of CEO Mark Wilson. Other companies worthy of consideration could be a housebuilder, such asTaylor Wimpey, or bookmaker Paddy Power Betfair.
Top scorers
In the investing world, Roys attacking linecould be the equivalent of four-to-five fast-moving, fast-growing, debt-free companies that give indications of having bright, profitable futures. Here, Roy may favour the consistency of top scorers like ARM Holdings, Just Eat orDominos Pizza. Given that Mr Hodgson may opt to takethe relatively inexperienced Marcus Rashford to France, he may also be tempted to add a more riskybut potentially highly-rewarding company like Sirius Minerals (LSE:SXX)to his portfolio. True, its yet to produce any profits (its 100-year fertilisermine in North Yorkshire still needs to be financed and built) but, so long as youre prepared for a bumpy ride, buying sharesothers shy away from, like Sirius, can be very rewarding.
Investing is a serious business, of course. It’s vital to thoroughlyresearch companies before deciding whether they’ve earned the right for a place in your portfolio. That said, in many ways building a diversified teamof dependable shares (with one or two blue-sky picks forrisk-tolerant investors) isn’t dissimilar from the task facing Mr Hodgson.
Before deciding which companies to take with you on your investing journey, it’s really important to understand the basics. To continue our football analogy, it’s like making sure you know the rules of the game before stepping on the plane to France. This is where the team at the Motley Fool ishere to help. Our experts haveproduced a special free report entitled 10 steps to making a million in the market. This is the perfect place to start if you’re new to investing and looking to build your wealth for the future.
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Paul Summers owns shares ofNational Grid, Unilever, Tesco, BHP Billiton, Easyjet, Aviva and Sirius Minerals. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended ARM Holdings, Diageo, Domino’s Pizza, Paddy Power Betfair, Reckitt Benckiser, and Sports Direct International. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
