I receive a lot of questions regarding portfolio risk, such as “How many stocks should I invest in, and should I concentrate on the few sectors that have the best potential in the current economic environment?”

I believe you should invest in as many stocks as you can keep up to date on. You should concentrate on sectors that look promising, but diversify enough to protect your portfolio from unforeseen events in the future. It is impossible to forecast exactly which stocks and which business sectors will perform best, so it’s best to diversify.

I am recommending two stocks today that are found in the same industry, but are almost opposites. Bunge (BG) is an average quality stock whose shares are quite volatile. The company is in the food processing industry and will prosper if inflation pushes agricultural commodity prices higher. J. M. Smucker (SJM), on the other hand, is a very high-quality company in the packaged food industry that will prosper if food prices stay the same or decline.

Bunge was founded in 1818 in the Netherlands and has grown to become one of the leading agricultural products companies in the world. Bunge buys soy, canola, flax and specialty oil seeds from farmers and processes them into protein meal for animal feed. The company also sells crude soy and canola oil or refines them and sells both to food manufacturers. Bunge is also the leading producer and supplier of fertilizer to farmers in South America, particularly Brazil.  Despite the current recession and slump in commodity prices, Bunge is building a major export grain terminal in the state of Washington and two new sugar processing facilities in Russia and Ukraine. The company is also expanding its operations in China and India.

Bunge’s sales and earnings are suffering from weak demand for soybeans used in ethanol and from weak demand for fertilizer brought about by farmers’ inability to borrow at reasonable rates in the tight credit market. In addition, farmers have cut back on plantings until food commodity prices increase. Earnings per share have plummeted to the lowest level in nine years, but a big turnaround should begin in the current quarter. I foresee increasing commodity prices providing rapid EPS growth for Bunge during the next several years.

Bunge is a solid company with $45 billion in sales and a strong balance sheet with little debt. I believe demand for agricultural products has hit bottom and is poised to rise rapidly with sales to China leading the way. Bunge will sell 10 million shares of its stock to fund future growth. The dividend provides a 1.3% yield. I expect BG to increase to my Minimum Sell Price within one to two years.

J.M. Smucker is the dominant producer and seller of jams and jellies, peanut butter, shortening and coffee. The company also produces packaged cake mixes, health and natural foods, and beverages. Important brand names include Smucker’s jam, Jiff peanut butter, Folgers coffee, and Pillsbury mixes. The November 2008 acquisition of Folgers is providing better than expected cross-selling opportunities and will add significant sales and earnings in 2009 and beyond. International sales accounted for only 13% of total sales, so there is plenty of potential to expand outside the U.S.

J.M. Smucker’s sales rose 69% during the six months ended July 31, 2009, and EPS increased 25.0%. The company is benefiting from people eating more meals at home and brewing their own coffee. J.M. Smucker’s price increases in 2008 and lower commodity prices in 2009 will lead to higher profits in this year and next. The steady 10% EPS growth of the past should continue well into the future. Dividends, which provide a 2.8% yield, have been raised each of the past 22 years.

SJM is undervalued at 13.0 times next 12-month EPS. J.M. Smucker’s balance sheet is very strong despite the $3.3 billion purchase of Folgers. SJM will likely advance tomy Minimum Sell Price within one to two years.