A Christmas-Comes-Early Portfolio

Many of the top names in the sector are down 55% from their highs of last year and are within earshot of book. The top-rated names at this point are Avatar Holdings(AVTR Quote), The Ryland Group(RYL Quote), KB Home(KBH Quote), Meritage Homes(MTH Quote), Tarragon(TARR Quote) and Orleans Homebuilders(OHB Quote).

Of the bunch, a favorite is urban-construction specialist Tarragon, which is trading at book value, sports a 3.9 price-earnings multiple and has been under heavy accumulation by its founders and insiders over the past three months. It is also on my list of stocks that have risen in 10 straight years; it's down 37% so far this year, so if it's able to keep up the string, it could show a lot of loft, so to speak.

And if it turns out that consumer and industrial technology prospects weren't so bad as they have seemed in the past few weeks -- in the wake of disappointing news out of Yahoo!(YHOO Quote), Dell(DELL Quote) and Intel(INTC Quote) -- then you might consider the shares of some companies that are trading at measurably cheap valuations and have already reported strong growth and solid outlooks.

A couple of top-rated names are disk-drive manufacturing-equipment maker Xyratex(XRTX Quote) and electronic design-automation specialist Mentor Graphics(MENT Quote).

A Pessimist's Portfolio

Now, if you're of a more pessimistic bent, then the fourth and fifth "future in review" scenarios are probably the most appealing. In that event, just in case some stocks survive the brush fire, you'll want to add some utilities and health care shares to your Christmas Portfolio. The top-rated Dow Jones Utilities Index companies are TXU(TXU Quote), AES(AES Quote) and Duke Energy(DUK Quote), so these are a great place to start.

Others include New Jersey Resources(NJR Quote), Pepco Holdings(POM Quote), OGE Energy(OGE Quote) and Avista(AVA Quote).

Stocking-Stuffer Stocks
Name	7/24 Close	Mkt Cap	% Chg YTD	Price/Book	PE	Industry
CSX (CSX)	$63.53	$13.7 B	22	1.6	13.8	Railroads
Norfolk Southern (NSC)	$46.95	$19 B	3.4	1.98	13.8	Railroads
Mentor Graphics (MENT)	$12.93	$1 B	20.8	2.2	1.4	Technical Software
Avatar Holdings (AVTR)	$54.50	$431 M	-4	1.27	7.3	Residential Construction
JPMorgan Chase (JPM)	$44.20	$149 B	8.7	1.38	16.5	Money Center Banks
Citigroup (C)	$47.46	$233 B	-3.3	2.06	9.5	Money Center Banks
Walt Disney (DIS)	$29.37	$62 B	18.8	2.41	21.1	Entertainment
ExxonMobil (XOM)	$65.36	$386 B	13.8	3.44	10.9	Integrated Oil & Gas
Merck (MRK)	$38.95	$81 B	17.4	4.32	17.1	Drug Manufacturers
Altria (MO)	$79.49	$166 B	6.6	4.36	14.8	Cigarettes
Johnson & Johnson (JNJ)	$61.98	$182 B	2.7	4.44	16.9	Drug Manufacturers
United Parcel Service (UPS)	$80.00	$51 B	4.8	5.11	22	Air Delivery
Caterpillar (CAT)	$70.52	$45 B	18.3	5.11	15.5	Construction Machinery
Tarragon (TARR)	$13.03	$367 M	-37.1	1.02	2.8	Residential Construction
Meritage Homes (MTH)	$36.82	$941 M	-43.8	1.06	3.3	Residential Construction
KB Home (KBH)	$40.31	$3.5 B	-46.2	1.19	3.7	Residential Construction
The Ryland Group (RYL)	$37.99	$1.7 B	-49.4	1.2	3.8	Residential Construction
Xyratex (XRTX)	$23.11	$634 M	25.3	3.69	0.9	Data Storage Devices
Orleans Homebuilders (OHB)	$14.27	$244 M	-27.5	0.92	3.9	Residential Construction
Source: MSN

You can weight the holdings on this list to match your beliefs and then alter them as the weeks and months progress -- validating or invalidating the scenarios. I will help out by reviewing the entire group in three months to help ensure that you don't let current emotions get the best of your long-range planning and can enjoy a very profitable holiday season.