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Holiday Portfolio: More Nice Than Naughty

Merry Christmas.

With Santa's work done and the presents unwrapped, attention turns to food, football and, of course, the final 2006 edition of the Holiday Portfolio.

While a few of the six portfolio components started off the year stuck in the chimney, many of them finished on this Santa's "nice" list, aided by a strong late-year market rally and solid fundamental performance at the companies themselves.

Before diving into the specifics, let's take a look at the purpose and process of this version of the Holiday Portfolio.

All Year Long

The concept is simple: I select a group of five stocks that I believe deserve watching over the next 12 months, readers add another stock pick, and I follow them -- regardless of their performance -- throughout the year.

I'll revisit the portfolio on each market holiday and, at times, make comments about the stocks on RealMoney's Columnist Conversation. 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.

The portfolio serves two purposes. First, it follows the fundamental progress of a group of stocks over a lengthy period of time. My hope is that the portfolio will serve as a forum for in-depth discussion of investment decisions and company strategy and reinforce the importance of ongoing portfolio analysis.

Second, it provides an opportunity to look at short-term trading strategies and longer-term investment strategies with the same stocks.

So, as you enjoy this holiday and all the joy that comes with it, let's take a look at the portfolio at Christmastime.

Banking Profits

The year's nicest entry in the Holiday Portfolio is Compass Bancshares (CBSS), which has benefited from a strong Southern economy and a solid rally in many of the larger regional banks.

The stock has rallied into the holiday season as banks have provided a nice lift to many portfolios in the past two months. Regional banks should continue to perform well, although Compass now trades more in line with its peers. Banks like Compass, especially with strong branch networks and good expense and bottom-line management, should continue to get attention into the new year.

Ho, Ho, Holiday Gains in the Jolly Holiday Portfolio
Company & Ticker Recent Price Price 12/31/2005 Change YTD Dividend Yield at Cost Current Yield
Altria (MO:NYSE) $85.72 $74.72 14.72% $3.44 4.60% 4.01%
Compass Bancshares (CBSS:Nasdaq) $59.75 $48.25 23.83% $1.56 3.23% 2.61%
Microsoft (MSFT:Nasdaq) $29.98 $26.15 14.65% $0.36 1.38% 1.20%
Pfizer (PFE:NYSE) $26.07 $23.32 11.79% $1.16 4.97% 4.45%
General Electric (GE:NYSE) $37.77 $35.05 7.76% $1.00 2.85% 2.65%
General Electric (GE:NYSE) $37.77 $35.05 7.76% $1.00 2.85% 2.65%
Portfolio Performance Y-T-D 11.32% 2.97% 2.62%
S&P 500 Y-T-D 11.84%
Source: TSC Research
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CHK $6.30 8.60%
GE $30.07 -1.83%
MO $63.23 0.05%
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PFE $33.40 -0.89%


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