Holiday Portfolio: Some Sparklers, a Few Duds

Building to Sell

While just above the flat line, the other portfolio member that gets top billing is Archstone-Smith (ASN). This apartment REIT was somewhat of a laggard when we last checked on Memorial Day, but it perked up after receiving a buyout offer from a group led by Lehman Brothers (LEH) and private real estate concern Tishman Speyer. The deal calls for a cash payment of $60.75 for each share of Archstone.

The deal is good for Archstone shareholders and helped bring the stock back to positive territory in the portfolio. Although the stock still yields more than 3%, my discipline has always been to move on once an acquisition is announced. Waiting for the deal to close and getting cash don't always pay, especially when the capital can be redeployed into other investments.

Archstone will remain a solid operating company as a private entity. However, this is the last time we'll discuss the company. Come Labor Day, we'll replace it with a new member in the Holiday Portfolio.

The Diversification Advantage

The balance of the portfolio has posted mixed results, but overall, the group continues to outpace its benchmark. The lesson: Diversification works. A portfolio with diverse economic sensitivities has once again proved its value, a tenet that should be present in every individual portfolio.

Altria (MO) remains a solid all-weather stock. A handful of investors may find some of Altria's products offensive, but the company continues to post profits and provide stellar returns to investors. That's a name I want in my portfolio.

Bank of America (BAC) is a good money-center bank with a decent dividend. The subprime market and interest rate concerns have impacted the sector, but Bank of America should post respectable second-half numbers. Moreover, the dividend pays you to wait for the next leg up in the bank sector, which should come before the end of the year.

I don't know what to do with Microsoft (MSFT). While off its lows, the stock of this technology giant continues to lag behind its peers. However, attempts to focus more on interactive content should help perk the stock up over time. Potential acquisitions in the search-engine and online space show Microsoft may still have a dose of the entrepreneurial spirit that made it what it is today. Patience here is likely to pay off later in 2007.

Overall, we've got a handful of sparklers and a couple of duds as we approach Independence Day. May your Fourth of July be full of fireworks and fun.

Enjoy the holiday -- play safely.

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