After making a few using method 1,  I quickly saw some disadvantages.  Primarily, I had no more coffee stirs and large diameter heat shrink.  Plus the ring of heat shrink around the battery was difficult and dangerous to put on.  Theses issues are resolved with the second method of assembly.

First, I reduced my materials need by using a smaller diameter heat shrink tube.  Lost the coffee stir, tape, difficult and dangerous assembly of the battery ring.

Clip and bend the leads of the LED.

Slip on heat shrink tube

Twist the leads so that they are inside the heat shrink tube.

Insert battery, and disconnect plug.

Shrink the tubing and you're done.