Ring in the New Year With These Five Solid Performers

If you're still searching for that perfect last minute gift, well, you're too late. Absent around-the-clock pharmacies and convenience stores, today's retail choices are abysmal.

But, never fear, I've come to your rescue. Consider this my Christmas gift to you -- a list of five stocks with solid potential into the new year that also should provide some stability for your portfolio.

Alberta EnergyAOG is a play betting that energy prices rebound in 2002. The company is one of North America's largest natural gas exploration and production companies, and trades at just over 11 times 2002 estimates. With natural gas prices languishing at around $2 per-million British Thermal Units, a move back to the $3 to $4 per-million Btu range would provide significant power for Alberta shareholders. Along with AnadarkoAPC, Apache APA and EOGEOG, Alberta is one of the blue-chips in the gas business.

Alberta CEO Gwyn Morgan is among the brightest and most candid executives in the business, which adds to my confidence. Given a rebounding economy and stronger commodity prices, Alberta could trade to the low-$40s. Although consolidation has slowed, the company also continues to be mentioned as a possible takeover candidate by one of the large U.S. natural gas players.

BellSouthBLS has been saddled with nothing but bad news in 2001 -- poor business decisions, regulatory issues, a slowing economy and on-again, off-again merger talk have all contributed to BellSouth's slow bleed this year. Most recently, the company announced another 1,200 layoffs planned for January.

Still, there is a lot that can go right here. Next year may well bring a chance for the company to monetize its 40% ownership in Cingular and in its international (ad)ventures, as well as offer outright merger opportunities as management seems to be coming around to the need to enhance value. The downside is the possibility of a deal -- such as a purchase of SprintFON or WorldcomWCOM-- that could put additional pressure on the stock.

Still, as the telecom shakeout continues, Jim Cramer thinks BellSouth will be a survivor. Combine that with its current low relative valuation and 2% dividend, and patient investors should see a recovery in the coming year.

Stocking Stuffers Some stocks to ho ho hold
Stock & Ticker	Recent Price	2002 Earnings Est*	2002 P/E	Debt/ Equity Ratio	Dividend	Current Yield
Alberta Energy (AOG:NYSE)	$36.61	$3.25	11.26	0.69	$0.40	1.09%
BellSouth (BLS:NYSE)	38.50	2.40	16.04	1.11	0.76	1.97
PS Business Parks (PSB:NYSE)	31.25	3.30	9.47	0.05	1.31	4.19
US Bancorp (USB:NYSE)	20.70	1.86	11.13	1.60	0.75	3.62
Williams (WMB:NYSE)	23.69	2.60	9.11	1.51	0.80	3.38
*PSBusiness Parks is Funds from Operations, of FFO, a REIT measure of earnings. Source:MarketGuide, ThomsonFinancial, Company Reports, TSC Research

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PS Business ParksPSB is a real estate investment trust (REIT) focused on industrial flex-space. While the stock has performed well in 2001, the company will benefit from an economic recovery and -- just in case -- is well positioned if the economy doesn't perk up as quickly as some expect.

This is one of the most conservatively managed REITs in the business. It has little debt and can manage its balance sheet and grow responsibly. PS Business Park's 4%-plus yield has room to grow as well, as the company pushes up against the minimum payout required by REITs. If you are looking for stability, current income and conservative growth, PS Business Parks should fit well in your stocking.

If you are looking for an unloved stock in the bank group, U.S. BancorpUSB is worth considering. Like BellSouth, this is a company that could do little right in 2001. The merger with Firstar was widely criticized as hasty, but appears now to provide the bank with a solid franchise and a platform for future growth.

Now the eighth-largest bank-holding company in the country, U.S. Bancorp will focus on building value in 2002. The company recently announced a 100-million-share buyback to be funded through internal cash flow.

Coupled with an economic rebound, one analyst thinks U.S. Bancorp will be a surprise performer. "The company also faces the prospect of a stronger economy six months from now and that will lower credit costs and improve earnings," says SunTrust Robinson Humphrey bank analyst Christopher Marinac. "U.S. Bancorp seems to be a sleeper capable of awakening and producing surprising relative returns." He rates the stock accumulate and his firm has not provided banking for the company.

The stock is also cheap, trading at only 10 times 2002 cash flow, vs. an average of nearly 12.5 times cash for its peers. Combined with a 3.6% dividend, you get stability with growth potential. Not a bad way to position your portfolio ahead of an economic recovery.

The final name on the list, WilliamsWMB, is a player in the much maligned energy trading business. Yet, while its growth in trading and marketing has been on par with peers like DynegyDYN and El PasoEPG, it's much more than just a trading firm.

Williams is also a leading energy pipeline company and, through its acquisition of Barrett Resources, it is now a major player in natural gas exploration and production. The company's diversified energy business makes earnings much less susceptible to the volatility in the energy trading business.

In addition, Williams is disciplined. The company recently announced a 25% reduction in capital spending and the sale of $250 to $750 million in non-core assets to further strengthen its balance sheet. And, unlike many of its peers, all three credit rating agencies recently reaffirmed Williams' rating and outlook.

The company is on track to make $2.40 per share this year and in the neighborhood of $2.60, conservatively, in the coming year. Yet the stock trades at only nine times 2002 earnings and yields nearly 3.4%. With long-term earnings growth projected at 10% to 12% and the stability of its diversified earnings stream, Williams deserves a look.

There you have it. Five companies to consider as stocking stuffers for your portfolio -- or if you're already done shopping, as postholiday bargains to stock up on.

To all of you: Merry Christmas, happy holidays and a very happy and prosperous new year!