One of the best things about investing in stocks is options — not the “stock options,” but the wide variety of options you have to choose from. You can choose to invest in the sectors you understand or in industries growing at an unprecedented pace, allowing you to diversify and spread out the risk.
But what if you didn’t have so many options? What if you had only three stock choices? Would you still diversify and choose from three completely unrelated sectors and compromise on growth or dividends? Or would you choose something you personally like or understand?
These are essential questions, and every investor should try and find their own answers to these questions. This will help you realize which stocks/companies you are unconsciously attracted to. For me, the choice was straightforward.
An alternative financial company
Goeasy (TSX:GSY) is one of the stocks I would definitely keep. It has displayed incredible growth with an impressive dividend growth history. The company had proven its mettle time after time, most recently in the March crash, when it recovered from a brutal 70% fall, yet still managed to recover to its start-of-the-year valuation, and grew almost 194% in just over six months.
The company has an impressive history and a dominant position in the alternative lending market. In its 30 years of operations, the company has evolved quite rapidly, and the chances are that it will continue growing for a while yet. It’s a dependable dividend stock, a powerfully consistent growth stock, and a profitable business.
The classic choice
Fortis (TSX:FTS)(NYSE:FTS) is one of the stocks that I genuinely believe will be in many investors’ “only three” choices. It has a stellar dividend history, a decent yield, a reasonable dividend growth rate, and the capital growth history is not too shabby. And most important, it’s a safe stock. But another reason to choose Fortis is the company’s futuristic outlook.
The shift toward green energy is inevitable, and people running Fortis seems to understand that. The company also has a strong balance sheet, a sizeable collection of assets, and investor sentiment around the company rarely shift. This is a safe stock that doesn’t weight down your portfolio and adds both growth and dividends.
A bank
National Bank of Canada (TSX:NA) completes the trio. The largest bank outside the Big Five is also one of the best growth stocks in the industry and a trusted Dividend Aristocrat. The bank recovered quite swiftly (at least compared to the other banks) after the market crash, and it’s already trading above its start-of-the year valuation. The 4.2% yield is juicy enough, and very safe if we consider its payout ratio.
It has a sizeable domestic footprint, and even though it doesn’t come very close to the Big Five in magnitude and market capitalization, it’s still formidable. It has shown fantastic capital growth and recovery potential in the past, and chances are that it will continue to do so again.
Foolish takeaway
Limiting yourself to three stocks might not be an efficient choice if you manage your portfolio yourself; it would make things easier. Still, understanding your favourite companies might take a lot of work out of your portfolio management.
Rather than tracking lots of stocks, you can limit yourself to a handful. Just add to your stake when they are on a discount or sell some shares when they have reached a peak and are about to normalize (to increase liquidity).
