6 Shares For A Balanced Portfolio: ARM Holdings plc, Diageo plc, BP plc, SABMiller plc, National Grid plc And ASOS plc

ARM Holdings plc (LON:ARM), Diageo plc (LON:DGE), BP plc (LON:BP), SABMiller plc (LON:SAB), National Grid plc (LON: NG) and ASOS plc (LON: ASC).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Take a portfolio whose default risk is virtually zero. Its weighted beta is 0.72, which is not particularly high. The investment period is five years. No lock-in period. These are the portfolio’s components: ARM Holdings (LSE: ARM), Diageo, SABMiller (LSE: SAB), BP (LSE: BP), National Grid (LSE: NG) and ASOS (LSE: ASC).

ARM Holdings25% ARM

ARM stock has dropped 18% so far this year. Uncertainty still surrounds the outlook for growth in tech-land, but ARM boasts a strong foothold in the fast-changing smartphone market, and is net cash, which signals a strong balance sheet.

Admittedly, it doesn’t come very cheap. As I recently argued, however, if management deliver on their promises and trading multiples revert to mean, then the upside could be 20% or more. Key to ARM’s success will be how fast managers react to shifting consumer preferences. It remains a takeover target.

12% Diageo & 18% SABMiller

Neither stock has performed well in the last year or so, but very little could go wrong with these two businesses. In the last five years, Diego has outperformed the benchmark index by 67 percentage points, excluding dividends — while SAB has fared even better.

Their payout ratios aren’t incredibly attractive, but their hefty operating margins, strong fundamentals and manageable debts are elements to like. Diageo and SAB are favoured by long-term trends in emerging markets. Extraordinary corporate activity supporting the shares of both companies shouldn’t be ruled out in the medium term, either.

30% BP & 10% National Grid

BP is a decent dividend play, and if it slims down quickly while preserving margins, its stock could certainly outpace the growth rate it has recorded in recent times. The macroeconomic outlook also supports a positive view on the oil behemoth. It must regain pride, but operationally the business is getting back on track.

National Grid, for its part, has a solid asset base. Its size and investment plans allow for an upbeat stance even when it comes to assessing leverage ratios that would not be considered acceptable for smaller competitors in the same sector. 

ASOS5% ASOS

I recently said that “taking a bet on the online fashion retailer at £42-£45 would make a lot of sense for an investor whose portfolio is properly diversified.”

ASOS issued a profit warning last week, its second in three months. Its stock plummeted to a low of £28.3 on Thursday, yet it bounced back to close at £33.5 on Friday. It’s outperforming the FTSE 100 Index on Monday.

I reiterate my positive view on ASOS, because I believe the business is well positioned to grow and it could receive a blown-out offer given that consolidation is likely to speed up in the online retail sector.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alessandro does not own shares in any of the companies mentioned.

More on Investing Articles

Investing Articles

5 steps to start buying shares with under £500

Learn how this writer would start buying shares with a few hundred pounds in a handful of steps, if he…

Read more »

Young happy white woman loading groceries into the back of her car
Investing Articles

The FTSE 100 offers some great bargains. Is this one?

Our writer digs into one FTSE 100 share that has had a rough 2024 to date, ahead of its interim…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£9,000 of savings? Here’s my 3-step approach to aim for £1,794 in passive income

Christopher Ruane walks through the practical steps he would take to try and turn £9,000 into a sizeable passive income…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’d buy 29,412 shares of this UK dividend stock for £150 a month in passive income

Insiders have been buying this dividend stock, which offers an 8.5% yield. Roland Head explains why he’d choose the shares…

Read more »

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the…

Read more »

Investing Articles

With a 6.6% yield, is now the right time to add this income stock to my ISA?

Our writer’s looking to boost his Stocks and Shares ISA. With this in mind, he’s debating whether to buy a…

Read more »

Dividend Shares

This blue-chip FTSE stock just fell 12.5% in a day. Is it time to consider buying?

Smith & Nephew is a well-known, blue-chip FTSE stock with a decent dividend yield. And its share price just dropped…

Read more »

Investing Articles

At 72p, the Vodafone share price looks to be at least 33% undervalued to me

Our writer looks at a number of valuation measures to determine whether the Vodafone share price reflects the fair value…

Read more »