Individual Stock Picks: Taking the Plunge?

The recent market downturn has got me thinking about taking the plunge into investing in individual stocks for the first time. Of course, I am a champion of index fund investing, so individual stock picking perhaps goes against my better judgment. But with so many stocks trading at all-time lows, I have been rethinking my prior skepticism about individual stock investing.

I have a natural inclination toward dividend stocks, since dividend paying companies are stable enough to be able to afford to return their earnings to shareholders. Dividend stocks, however, often do not have as much potential for future growth, already being mature companies in their respective markets.

Growth stocks, on the other hand, as the name indicates, have the potential for growth, but no guarantee. There is an element of luck involved due to the lack of foreseeability about which companies will prosper and which companies will struggle. It is this uncertainty that is the cause of my hesitation to take the plunge into individual stock investing.

Despite my reservations, I am attracted to the idea of owning portions of the companies that I care about. Were I to throw a little caution to the wind and put some of my portfolio in individual stocks, I would only be interested in owning pieces of companies that I have an emotional connection to. While emotional investing is hardly a recipe for success, I do think it would be possible to evaluate those companies that one has an emotional connection to in order to determine which ones are truly sound investments and which are train wrecks waiting to happen.

There are several companies that I have an emotional attachment to, which would be the basic pool from which I would attempt to build an individual stock portfolio. Here is a quick summary of those stocks that I am currently considering:

Burlington Northern Santa Fe Railway (BNI)

Ever since I was a kid I have had an unhealthy obsession with the railroads. Sadly, corporate mergers have all but eliminated many of the railroads that I used to love as a kid. My all-time favorite railroad was the Burlington Northern with its attractive forest green and black color scheme. The Burlington Northern Sante Fe railway is the proud successor to the Burlington Northern; and with the continually promising future of freight railroading, due to its affordability, the BNSF (BNI) has a promising future.

RadioShack Corporation (RSH)

RadioShack and I have a healthy long-term relationship with one another. While the stock price is far from stable, regularly fluctuating between $15/share and $30+/share, its current low price makes RSH an attractive stock to obtain during the current market slump.

Consolidated Edison (ED)

I cannot really explain my desire to own some Consolidated Edison stock. Perhaps it is my fascination with all things electricity and my fascination with dividend paying stocks that reach a happy medium in Consolidated Edison. As the major source of power for New York, I figure that Consolidated Edison has a solid future for the foreseeable future. And with a consistent history of increased dividends, Consolidated Edison would be a good stock to own to reap the benefits of dividend reinvestment.

Alcoa, Inc. (AA)

Since my days as a summer-time professional dumpster diver, I have kept a constant eye on the goings-on of the scrap metal business. With rising scrap metal prices (e.g. aluminum and copper) and increased profitability, Alcoa, Inc. looks to be an attractive stock due to its significant market share in the scrap metal business.

Citigroup, Inc. (C)

With all the recent problems with sub-prime lending in the banking industry, banking stocks have taken quite a hit. The old adage of "buy low, sell high" would seem to apply to the baking industry as a whole right now. While I believe that any banking stock would be an excellent choice right now, I am constantly drawn toward Citigroup (i.e., Citibank) since I have had nothing but the best experience in dealing with this company. And at the current price point of $19.78/share, Citigroup can safely be called a bargain stock that is sure to rebound once the economy stabilizes a bit.

So there you have it, folks. I would appreciate any thoughts or comments you might have on these individual stock picks, or on the wisdom of taking the plunge into individual stock investing in general. I am not prideful about these stock picks, so please feel free to tell me if you think these stock picks are way off base or if you think I am foolish for even considering deviating from my long-term ETF portfolio as my sole investment strategy.