The Holiday Portfolio's Hot Stuffing

Today, we review the five stocks selected at the beginning of 2007 and the outlook over the coming weeks.

Giving Thanks

One important hallmark of the Holiday Portfolio -- and what should be an important tenet of any portfolio -- is industry and sector diversification. All of my life, on the buy side and on the sell side, I have preached the importance of building a well-rounded portfolio for all-weather markets.

This year's success is, in large part, due to that strategy. While the portfolio has financial exposure in the form of Bank of America(BAC Quote - Cramer on BAC - Stock Picks), it also has entrants from four other diverse sectors. So while the financial sector is lagging, the overall portfolio is scorching the market.

The second hallmark is current income. While not every stock in the portfolio provides a dividend, most do, and those that do we considered very safe at the beginning of the year. So even in a difficult market we have an income component that can provide a solid foundation for growth in value. While some may now question the safety of financial dividends, we continue to believe that BofA's base dividend is secure.

There is little question that the portfolio winner this year has been Carrizo Oil and Gas(CRZO Quote - Cramer on CRZO - Stock Picks), up more than 70% since January. This natural gas explorer has been incredibly successful in the Barnett Shale of Texas and along the Gulf Coast of the U.S. In addition, the company has received a boost from recent oil discoveries in the North Sea, a piece of the portfolio that is still not entirely recognized in Carrizo's price.

Though a lot of the easy money has been made, opportunities in the Floyd Shale as well as continued growth in the North Sea and the Barnett Shale make this a core small-cap energy holding into the coming year.

We are also thankful, finally, for old Mister Softee. A stock that many had written off, Microsoft(MSFT Quote - Cramer on MSFT - Stock Picks) has finally provided some value for patient shareholders. Though a slowing economy could slow this run, Vista is finally gaining traction, and a new round of hardware in software upgrades should continue to support current value.

And then there was Altria(MO Quote - Cramer on MO - Stock Picks). As I have said before, how can you not own this stock? Great management, superb cash generation and an ability to make money across economic cycles make this one of the best core holdings for almost any portfolio. While political risk remains, the company has shown that it can navigate those waters, and the dividend is simply difficult to ignore.

Finally, we say good bye to Archstone Smith, which became a private company after being purchased for $60.75 per share in early October. We would usually replace the stock, but we will wait until we pick the 2008 version of the portfolio to consider another real estate play.

Turkeys?

It is very difficult to handicap the Bank of America play. I still believe that there is plenty of fallout from the credit crunch and that the credit cycle becomes more punitive before the bad news from financials is done. While Bank of America has its share of issues, they look manageable. That doesn't mean the stock doesn't go lower; it well could. However, I believe the dividend remains stable, and that should begin providing some support for the stock near current prices.

That said, this is one of the most difficult credit markets I have ever seen, and it could get much worse before it gets better. Since I agree to keep these stocks in the portfolio for the entire year, I stick with the pick. However, come the new year, it will be time to seriously reassess the situation.

Happy Thanksgiving

This holiday portfolio is certainly something for which to be thankful. However, more importantly, we all should be thankful for family, friends and those who serve our nation in support of our freedom and way of life. While these markets may be difficult for us, please think of the challenges facing those who serve our country overseas and away from families this Thanksgiving Day.

From my family to yours, may you have a safe and Happy Thanksgiving.

	Recent Price	Price 12/31/2006	Price Change	Current Dividend	Current Yield	Yield At Cost
Altria (MO:NYSE)*	$73.60	$64.41	14.27%	$3.00	4.08%	4.66%
Archstone-Smith (ASN:NYSE)**	$60.75	$58.21	4.36%	--	0.00%	0.00%
Bank of America (BAC:NYSE)	$42.55	$53.39	-20.30%	$2.56	6.02%	4.79%
Carrizo Oil & Gas (CRZO:Nasdaq)	$49.67	$29.02	71.16%	$-	0.00%	0.00%
Microsoft (MSFT:Nasdaq)	$34.58	$29.86	15.81%	$0.40	1.16%	1.34%
Unweighted Average			17.06%		2.25%	2.16%
S&P 500			0.70%
*Adjusted for Kraft Transaction **Purchase price in private transaction Source: Company Reports, Bloomberg, TSC Research

« Previous Page

1 2

Next Page »