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Holiday Portfolio: Auld Lang Syne

Happy New Year!

With 2006 in the books and a new year beginning, resolutions and optimism are upon us. However, today is a day of celebration, football and good food and drink. (So much for some of those resolutions!)

It's also a day to take one last look at the 2006 edition of the Holiday Portfolio.

The past year was a tale of two markets. The first half was difficult for much of the market and for the stocks in the Holiday Portfolio. However, starting with Labor Day, the market seemed to sprint to year-end, and much of the Holiday Portfolio followed. While not all names participated in the year-end rally, the portfolio -- with its nice yield -- held its own against the broader market.

Before our final review, let's take a look at the Holiday Portfolio's rules.

From January to December

The concept is simple: I select a group of five stocks that I believe deserve watching over the next 12 months, readers add one pick, and I follow them all -- 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 both short-term trading strategies and longer-term investment strategies with the same stocks.

So, as you enjoy this holiday, let's take a look at the portfolio.

Total Return

Going into the final trading day of the year, the Holiday Portfolio boasted a total return of 14%, including dividends. Although that's slightly behind the S&P 500, it is right in line with the broad market, which feels pretty good in a year like 2006.

Onward Into 2007
Here's one last look at the 2006 Holiday Portfolio
Company & Ticker Recent Price Price 12/31/2005 Change YTD Dividend Yield at Cost Current Yield
Altria (MO:NYSE) $86.23 $74.72 15.40% $3.44 4.60% 3.99%
Chesapeake Energy (CHK:NYSE) $29.37 $31.73 -7.44% $0.24 0.76% 0.82%
Compass Bancshares (CBSS:Nasdaq) $60.21 $48.25 24.79% $1.56 3.23% 2.59%
Microsoft (MSFT:Nasdaq) $30.00 $26.15 14.72% $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) $37.48 $35.05 6.93% $1.00 2.85% 2.67%
Portfolio Performance Y-T-D 11.03% 2.97% 2.62%
S&P 500 Y-T-D 14.13%
Source: TSC Research

The biggest victory of the year was recognizing an underappreciated regional bank with decent management, a good franchise and the opportunity to improve the position of its loan portfolio. Compass Bancshares (CBSS) passed the test, benefiting from a strong Southern economy and a solid rally in many of the larger regional banks.

Compass now trades more in line with its peers, but the group should continue to do well. Banks like Compass, especially those with a strong branch network and good expense and bottom-line management, should keep attracting attention in the year ahead.
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CHK $5.87 3.90%
GE $30.14 0.23%
MO $63.00 -0.36%
MSFT $50.08 0.42%
PFE $33.66 0.76%


Chart of I:DJI
DOW 17,706.91 +55.65 0.32%
S&P 500 2,056.95 +5.83 0.28%
NASDAQ 4,737.2170 +11.5780 0.24%

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