Adding stocks for diversification to your portfolio is still the best approach for most investors. While mega-cap technology stocks continue to lead the market higher, having all one’s eggs in that basket is risky. Over time, the stock market rally will broaden out, and sector rotation will occur. When that happens, investors who have a diversified portfolio will benefit.
Studies have shown that diversification improves investment returns and stabilizes a portfolio. Owning different asset classes that move at different times allows investors to manage to reduce their overall risk. Diversification can also help protect a portfolio in sudden and unexpected market downturns.
Other benefits of diversification include exposure to different segments of the economy and help smooth out returns over long periods. Here are three stocks to buy for a diversified portfolio in 2024.
Accenture (ACN)
Accenture (NYSE:ACN) is a massive information technology (IT) and consulting firm based in Dublin, Ireland. The company reported revenues of $64 billion, with more than 730,000 employees last year. A position in ACN stock gives investors global exposure to a leading European company.
The stock has a consistent track record. The share price will be up 7% in 2024, has gained 36% in the last year, and will be up 145% through five years. Throw a quarterly dividend of $1.29 a share, and Accenture looks like a good bet.
The company also consistently beats earnings estimates. Right before Christmas, Accenture reported financial results for its fiscal first quarter, announcing earnings per share (EPS) of $3.27, which beat forecasts of $3.14. Revenue in the quarter came in at $16.20 billion, which was better than estimates of $16.17 billion. ACN stock is trading near a 52-week high and is a little expensive, trading at 34 times future earnings estimates. But that’s still a better valuation than many mega-cap U.S. tech stocks.
Darden Restaurants (DRI)
U.S.-based Darden Restaurants (NYSE:DRI) operates a diverse portfolio of restaurant chains in most of America and Canada. The company’s restaurants include Olive Garden, LongHorn Steakhouse and Ruth’s Chris Steak House. After a bruising downturn during the COVID-19 pandemic, when most of its outlets were forced to close, DRI stock is on the mend, having risen 9% in the last 12 months.
DRI stock can be expected to continue rising in the year ahead as Darden Restaurants’ financial health improves. In December, Darden reported strong quarterly results that beat Wall Street estimates and raised its forward guidance. The company announced EPS of $1.84 versus $1.74 that had been expected. Revenue in the company’s fiscal second quarter totaled $2.73 billion compared to the $2.74 billion analysts forecasted.
Darden’s sales were up nearly 10% from a year earlier in the quarter. The company updated its fiscal year 2024 outlook, forecasting EPS of $8.75 to $8.90, up from previous guidance of $8.55 to $8.85 per share. Darden also forecast $11.50 billion in sales for its current fiscal year. DRI stock pays stockholders a quarterly dividend of $1.31 per share, giving it a chunky yield of 3.24%.
Toyota Motor (TM)
Now to Japan and Toyota Motor (NYSE:TM), the world’s top-selling automaker. TM stock has been one of the best automotive securities to own over the past year. While most auto stocks sank in 2023, Toyota’s share price rose 36%. TM stock is up another 10% to start 2024. Strong financial results and an aggressive plan to electrify its vehicle fleet have lit a fire underneath Toyota’s stock, sending it up near an all-time high.
In its most recent earnings print, Toyota reported that its fiscal second-quarter profit more than doubled from a year earlier. The company attributed the profit surge to strong global sales of its vehicles, particularly gas-electric hybrid vehicles, where sales increased 41% year-over-year in the most recent quarter. Toyota has also unveiled plans to sell 1.5 million electric vehicles annually by 2026 and 3.5 million battery-powered vehicles annually by 2030.
TM stock also pays a decent dividend, currently set at $1.13 per share for a yield of 2.26%.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
