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Stuck for 2 years on island? Here are the stocks to own

Fund managers pick Carnival, GE, IBM, Nokia, OCI

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Recent events have once again demonstrated that lack of diversification in a stock portfolio can be dangerous to your economic health. Still, in the pursuit of promising investment ideas, Kiplinger's Personal Finance magazine recently asked a select group of mutual fund managers to imagine that they were stranded on a desert island for a couple of years. What single stock would they want to own for all that time?

Ralph Wanger, who captains Acorn Fund, picked Carnival, the cruise operator that runs the Carnival Cruise, Cunard and Windstar lines. It's the largest company in its business and has a dominant share in each sector of the industry, notes Wanger. "It also has excellent management and profit margins, and its stock is cheap."

Karen Reidy, who runs Janus Equity Income and Janus Balanced funds, would take General Electric into island exile. In Reidy's view, GE is a diversified economy in miniature, thus an ideal candidate for an investment you can live with for years. "There will be enough growth in earnings and in cash flow to be the catalyst for a higher stock price over time," he says

Howard Ward's companion under the palms would be IBM. If you believe in the Internet, says the Gabelli Growth fund manager, you have to believe in Big Blue. Ward considers the stock inexpensive at 24 times this year's expected earnings. "It's a low-risk way to participate in the new economy, in a stock of virtually unparalleled financial strength," he says.

If you were to strand Frederick Reynolds on an island, he'd like a phone — specifically, a Nokia phone. The manager of Reynolds Blue Chip Growth fund is a big fan of the Finnish cellular-phone giant, the world's leading maker of cellular handsets. Nokia also possesses key technology for telecommunications networks and Internet telephony. Earnings are rising about 30 percent annually, and Reynolds believes the company can maintain that pace for some time.

Harold Sharon, a portfolio manager for Warburg Pincus International Equity fund, would head to sea holding OCI Communications, a Toronto Stock Exchange-listed provider of telecommunications. He believes it will give investors the chance to profit from telecom deregulation in Canada just as they did in the U.S.

Larry Puglia of T. Rowe Price Blue Chip Growth Fund likes State Street, the venerable Boston company that manages money and sells lucrative services to institutional investors and mutual fund companies. Its revenues are rising about 15 percent annually. Puglia believes this pace should only increase as State Street adds to its offerings and diversifies abroad, where investors thirst for the financial offerings Americans have long enjoyed.

Finally, British-based Vodafone AirTouch is the desert-island pick of Howard Moss, who co-manages Harbor International Growth fund. Vodafone is the world's biggest wireless company. Analysts predict its earnings-growth will be 30 percent annually. But Moss believes that profits may rise even faster.

(Kiplinger's Personal Finance Magazine, 1729 H St. NW, Washington, DC 20006; monthly, $23.95 annually)

Investor's Notebook is a digest of investment opinion from the world's leading financial advisers. It does not recommend any specific investments, and no endorsement is implied or should be inferred. For more information, contact the individual firms cited.