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Holiday Portfolio: Digging In to Year-End

The joys of Thanksgiving. A time to talk turkey, watch football and, of course, review's holiday portfolio.

Some lessons are easier learned than others.

At this time a year ago, I penned the following: "There is plenty to be thankful for in this year's portfolio, especially when you consider that one turkey -- Pfizer (PFE - Get Report) -- is down over 20% (more on that later). In total, the portfolio has worked just about as I had hoped -- good balance between dividends and growth."

Fast forward one year, and the message is the same: The holiday portfolio has worked beautifully, showing that diversification -- meaning owning quality equities across various economic sectors (not necessarily just a lot of stocks) -- provides one of the better methods for stable, less volatile growth of an equity portfolio. The holiday portfolio is only five stocks, but stocks that represent diverse economic sectors, and it has again -- even with the ghost of Pfizer -- provided better-than-average performance.

This portfolio was built on the premise that the pieces for a solid economic environment were in place, but high energy costs could affect that growth. In addition, while I hoped the Fed policy would be accommodative, I wanted companies that could perform regardless of what the Fed might do. As such, I was hoping to combine the stability of income-producing equities with companies that were poised to benefit from economic growth with the income providing a "hedge" if my theory was a bit off. Pfizer hasn't worked; the others have.

Before I take a closer look at the five members of the portfolio, let's quickly review the purpose of this exercise I call the holiday portfolio.

365 Days

I created the first holiday portfolio three years ago, hoping to craft an occasional column (for those looking for something to read on market holidays) that would track a concentrated portfolio of core equities for an entire year. In doing so, it gives me (and you) the chance to think longer-term about the fundamentals of a company's business as well as its industry. We follow the stocks in the holiday portfolio -- regardless of their performance -- throughout the year. The only way a stock is removed from the portfolio is if it merges with another company or ceases to trade on a major exchange.
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