The following article is part of The Motley Fool's "Stock Madness 2006," based loosely on the annual NCAA College Basketball Tournament, a.k.a. "March Madness." Throughout the competition, our writers and analysts will engage in head-to-head competition. You, dear readers, are the fans and referees -- after you read these exciting duels, your votes will determine who moves on to the next round of play. The writer who survives the tournament will be our champion and most valuable "coach."
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If you want to win, you need balance. Allen Iverson might be one of the most talented people to ever handle a basketball, but what has he managed to accomplish with the Philadelphia 76ers? It's all well and good to have some riskier growth ideas in your portfolio (in fact, I think almost all of us should), but you build a winning portfolio the same way you build a winning team -- a core of solid players who know their role, come at good prices, and are more likely to give you positive surprises than negative ones.
Let's look first at the riskier part of my mini-portfolio in this tournament. Transocean
So we've looked at the snipers -- now let's look at the bench. I realize that 3M
What's more, they all have a certain amount of inevitability to them -- we're talking about major franchises in food, banking, and household and industrial products. So whether the economy slows, the housing boom collapses, or there are more terrorist attacks, General Mills is still going to sell cereal and 3M is still going to sell Post-it notes. And by the way, these three happen to also pay nice dividends.
Shruti Basavaraj's rebuttal
While Stephen is busy finding balance in his life (try yoga, Stephen, it works wonders), his portfolio is going to end up as deep underwater as those Transocean exploration rigs. He says that even if the economy slows, people will keep on buying those Post-its from 3M and cereal from General Mills. But 3M is highly affected by manufacturing costs, and General Mills is dependent on raw-material costs -- and that leaves the companies exposed to an uptick in inflation, which might come with a slowing economy.
My portfolio should stand up under good times and bad. People will need cardiovascular therapies to treat medical disorders even if the housing bubble pops. Women will need Elizabeth Arden's
3M is a Motley Fool Inside Value recommendation, and JPMorgan Chase is a Motley Fool Income Investor pick. We have newsletters to suit lots of investing styles -- take your favorites for a free, 30-day trial run.