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Here are 10 FTSE 100 stocks that could build a winning portfolio

You buy a FTSE 100 stock, something goes wrong at the company, and the stock price crashes. Luckily you have a portfolio of FTSE 100 stocks, and the rest are doing ok, so all is not lost.

But it was challenging to build a diversified portfolio. Finding one great stock was tough, so finding 10 was a real challenge. For those who are struggling, here are 10 FTSE 100 stocks that could help build a winning portfolio.

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FTSE 100 stock portfolio

The FTSE 100 contains stocks from 10 industries: basic materials, consumer goods, consumer services, financials, health care, industrials, oil & gas, technology, telecommunications, and utilities. Picking the stock with the highest percentage of analyst buy recommendations from each industry should build a solid FTSE 100 portfolio. These stocks are shown in the table below.

Stock Industry Analysts Recommending ‘Buy’
Informa Consumer Services 90%
Avast Technology 87%
RSA Insurance Financials 83%
Persimmon Consumer Goods 83%
Vodafone Telecommunications 78%
Polymetal International Basic Materials 78%
DCC  Industrials 75%
AstraZeneca Health Care 70%
National Grid Utilities 63%
BP Oil & Gas 50%

The logic behind holding a diverse portfolio of stocks is simple. Hold one bank stock, and if the company runs into difficulties, you could lose everything. Hold two bank stocks, and if one goes belly-up, the other could keep you from losing your shirt. However, what if the entire banking industry hit a rough patch? If you add stocks from multiple industries to a portfolio, you are protected against individual companies doing poorly, and also individual industries.

This thinking explains why BP is on the list. With only half of analysts rating it as a buy, you would be right in thinking that there must be stocks with better forecasts. But, BP is tipped as the best of the oil & gas bunch, and the goal here is to include stocks from all the FTSE 100 industries.

Changing things up

A portfolio that includes the highest recommended stock from all the FTSE 100 industries is a solid starting point. An investor can, of course, tweak this portfolio as they desire. However, they will have to keep risk firmly in mind. Dropping BP, perhaps even National Grid and including better-tipped consumer services stocks concentrates risk in that industry.

Dropping one of the stocks entirely (such as BP) and going with a nine stock or less portfolio also has consequences. Right now the oil & gas sector is going through a rough patch, but an investor cannot be certain that this will always be the case. Ignoring the fossil fuel industry entirely might mean missing out on chunky dividend payments in the future.

There is also the option of breaking down the industries into sectors. For example, the FTSE 100 includes stocks from four sectors in the basic materials industry: forestry & paper, mining, industrial metals, and chemicals. This approach would, however, build a 32 stock portfolio which might be difficult to manage.

It is, of course, possible to add more stocks to this portfolio. There might be a hot growth stock that just cannot be ignored, but again, be wary of putting all your eggs in one basket industry-wise.

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James J. McCombie owns shares in BP, National Grid and Vodafone. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.