Top Five Individual Stocks

While in general I don't have the stomach for the risk inherent to investing in individual stocks, I have toyed around with the idea of investing a small portion of my portfolio (say, five or ten percent) in individual stocks. Partly this is because individual stocks have potentially greater returns than ETFs or mutual funds, and partly because I am attracted to the idea of having a stake in companies I care about.

The problem is that I don't really have the drive/desire/time/energy it would take to research individual stocks for inclusion in my portfolio. But the idea got me thinking about what stocks I would include as a small percentage of my portfolio. I decided to come up with a top-five list of stocks that meet a few basic criteria for me to be interested in investing in them.

One criterion is that I actually have to care about or be interested in the company in some way. A really good investment in a company that I don't care about is really of no interest to me.

My second criterion is that I wanted the stocks to be in different sectors to remain diversified, even if this would still be a small portion of my total investments.

The last criterion is that the stocks be relatively stable companies that excel in their sector.

So without further ado, here is my top-five list of individual stock picks:

Medtronic (MDT)

This manufacturer of medical devices is perhaps best known for its heart stents and pacemakers. My good friend George Bondarenko has worked for this company for five-plus years, and it is a company that takes very good care of its employees. In addition to being one of the largest medical device manufacturers in the world, it should see very nice growth in the next several years as the baby boomer generation begins to age and falls prey to the various ailments that result from their extravagant and fast-paced (McDonald's anyone?) lifestyles.

Burlington Northern Santa Fe Railway (BNI)

Anyone who has known me longer than a week knows of my passion for all things railroad. Those who know me slightly better will know that the Burlington Northern was always my favorite railroad, despite the fact that it is now a Fallen Flag due to its merger with the Santa Fe a few years back. Despite their highly questionable orange and olive green locomotive color scheme, the BNSF is one of the largest railways in America (topped only by its less-than-favorite-in-my-eyes rival, the Union Pacific). There is a tendency to view railroads as outdated and very 19th century, but in truth they provide the backbone of our economy. It is said that 95% of everything bought or sold in this country was either transported on a train or made from components that were. Railroads used to compete with trucking for this honor, but the past decade has seen a remarkable turnaround in the railroad business because of its greater efficiency and cheaper cost.

Limited Brands (LB)

This parent company of Bath & Body Works, the company my wife works for, is one of the most respected and largest retailers in the country. Aside from being highly profitable, they are known for their unique shopping experiences from brands such as the aforementioned Bath & Body Works and Victoria's Secret. Needless to say, I care about how this one does as it is part of our bread-and butter!

Consolidated Edison (ED)

It is harder to explain why I care about this company. I like utility stocks in general because of their high dividends. With no real room to grow, companies such as Consolidated Edison generally return a significant amount of their profits to shareholders in the form of dividends. With a dividend reinvestment plan, this would be a nice addition to the income portion of anyone's portfolio. So why ED in particular? I figure that being the power company for New York City, the city that never sleeps, makes this about the safest utility in the world. And I just have a thing for power companies given my interest in all things electrical/electronic (Ham Radio, anyone?).

Bank of America Corporation (BAC)

Bank of America is a double-edged sword for me. In general they annoy me by their sometimes outrageous fees for what I consider to be silly things that are less than fee-worthy. On the other hand, those very fees are what make Bank of America so attractive as an investment. Financial stocks have the same advantage that utility stocks have: a large amount of capital to be returned to shareholders in the form of dividends. You can see that I have an attraction to the brute-force mathematics of dividend compounding. But why Bank of America in particular? I suspect that they are so popular because they go out of their way to be convenient. I can always find a branch or an ATM pretty much no matter where I am, and Bank of America has a wealth of useful online services. There certainly are better banks out there, but none that are really more convenient.

So there you have it, folks: my top-five stocks picks. I can't finish up this post in good faith, though, without mentioning another company that is dear to my heart: Ball Corporation (BLL). Ball is the manufacturer of metal and aluminum containers (take a look at the back of the soda can you may be drinking right this moment), as well as aerospace components. My dad also happens to be an engineer for Ball Metal at their corporate office in Broomfield, Colorado. The sheer complexity and efficiency of the manufacturing process has always fascinated me, and there are many times when I used to tag along with my dad at work when he was working in individual Ball can plants. So Ball is a company that is near and dear to my heart, more for sentimental reasons than for any sensible investing reason; but regardless it is a stock that I probably could not resist buying were I ever to take the plunge into individual stocks.