Building a balanced Stocks and Shares ISA portfolio is extremely important. One that is full of just tech shares or financial stocks is massively exposed to sudden corrections in those individual sectors.
If I were fortunate to have £20k sitting in an ISA today, I’d consider these three quality stocks. They’re very different from each other, thereby offering the necessary diversification.
FTSE 250 income
Many investors love dividends and I’m no different. BBGI Global Infrastructure (LSE: BBGI) is a FTSE 250 dividend stock that I recently bought.
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There are a number of things I like about this infrastructure fund. First off, there is a 6% dividend yield, which is forecast to rise to 6.6% by 2025. That’s far higher than the average mid-cap stock.
Second, I’m reassured by the nature of BBGI’s 56-asset portfolio. It includes schools, hospitals, prisons and motorways. The contracts are availability-based, which means BBGI receives income from public authorities based on the availability and performance of the asset, rather than how much it’s used.
While no dividend is guaranteed, this should make the income far more stable than most.
One risk, though, is the high interest rate environment, which could continue weighing on the share price. Higher rates push up borrowing costs and limit the growth of public-private infrastructure projects.
Despite this, BBGI says the projected cash flows from its existing portfolio are enough to grow the dividend for another 15 years.
FTSE 100 high-flyer
The second stock I’d consider is AstraZeneca (LSE: AZN). Shares of the FTSE 100 pharma heavyweight have hit record highs recently.
However, I think the stock could keep rising. In its recent investor day, the firm unveiled an ambitious target to reach $80bn in sales by 2030, up from $45.8bn last year.
To achieve this, it expects to launch 20 new medicines as well as increase sales from its existing portfolio, which is heavily focused on oncology, biopharmaceuticals, and rare diseases.
Of course, successful drug development is notoriously difficult, and a couple of failures in late-stage clinical trials for the next potential blockbusters could send the share price on a downwards spiral.
That said, the firm spent around 23% of its total revenue last year on research and development. So AstraZeneca’s massive pipeline is constantly expanding.
Despite its vast size and £195bn market cap today, the company remains extremely innovative and hungry for growth. This bodes well for shareholders.
Growth powerhouse
Finally, I’d inject a bit of zip into my ISA with MercadoLibre (NASDAQ: MELI). This company has built Latin America’s leading e-commerce marketplace and payments app.
Growth has been strong for years but looks set to continue, with around 70% of Latin America’s 670m population lacking access to either a bank account or lending services. The firm’s digital wallet (Mercado Pago) acts as a gateway to the financial system for many of these individuals.
One risk to note here is that Latin America’s economies and currencies can be very volatile. Inflation has been very high in Argentina recently. Such things have the potential to negatively impact the company’s earnings.
Nevertheless, analysts still expect MercadoLibre’s revenue to double from $19bn in 2024 to over $39bn by 2028, as e-commerce takes off across the region.
So, I’d consider snapping up the stock today, especially as it currently sits 20% below its peak.
