Individual Stock Picking Advice

Last week, I wrote about Baby Steps For Individual Stock Picking, which gave starter tips on how one can invest in individual stocks. While I tend to primarily invest in low-cost index funds, I am interested in investing in a few individual companies whose business policies I greatly admire.

Why invest in individual stocks at all? First of all, I have no interest in active stock trading – to me, buy and hold (or buy and homework) is the real way to go. I plan on buying companies that have earned my business and holding those stocks for a long time.

That being said, how can I know this is a good investment? A big portion of this is, as discussed in the comments of the first Baby Steps thread, the desire to focus my investments on companies that match my personal values. For example, if I buy Exxon stock, I’m implicitly opposing alternative energy sources, something I’m uncomfortable with. On the other hand, if I buy CostCo stock, I’m implicitly supporting the concept of treating your employees well. If I buy a broad market fund, I own both companies, but if I just buy CostCo individually and don’t buy Exxon, I know that I’m supporting companies that share my personal philosophy with my investment dollars.

A sample portfolio My wife and I have discussed companies we support quite often and we’ve attempted to select a portfolio of four stocks that match our shared values.

Herman Miller (MLHR) makes absolutely amazing chairs, both incredibly comfortable (I love my Aeron) and great examples of ecodesign.

Hasbro (HAS) makes games of all varieties and gives extensively to children’s charities.

Cisco Systems (CSCO) is a technology giant with superb management philosophies that treats employees quite well.

Anheuser-Busch (BUD) is a brewery that does exceptional work in minimizing their environmental impact.

We would also strongly consider Costco and Berkshire Hathaway for our portfolio.

A portfolio consisting of equal amounts of these four stocks would be up over 5% for the year, while a portfolio with all six stocks bought in equal amounts at the start of the year would be up 7.36%. In each case, the investments align with our personal values, they line our pockets, and we can sit back and just let the investments ride until our feelings about the company change.

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