Holiday Portfolio: Five Resolutions for 2008

Happy New Year!

As the calendar rolls from 2007 to 2008, we all make New Year's resolutions. I'm no different, with 2008 being the year I will finally get back into shape, spend more time with my wife and daughter (and expected twins boys midyear) and spend more time with the loyal readers of the TheStreet.com and RealMoney.com.

Let's begin 2008 with one last look at the five stocks selected at the beginning of 2007. Then, I will wipe the slate clean and pick five news stocks to follow in the new year.

But before I do so, let's take a quick look at the purpose and process of this TSC tradition.

The concept behind the holiday portfolio is simple: I select a group of five stocks that I believe deserve watching over the next 12 months, 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 in 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.

Revelry in the Rearview Mirror

While 2007 is history, a quick look at the final tallies for the annual portfolio just concluded seems appropriate. (Last week's Christmas edition of the holiday portfolio detailed each of the entries, so we won't repeat specifics.) Energy, consumer staples and Mister Softee(MSFT Quote) all worked, with energy working really well. The portfolio got a nice bailout through the acquisition of an otherwise anemic apartment real estate investment trust. But like just about every financial stock, our big bank -- Bank of America(BAC Quote) -- struggled.

However, when the dust settled, the 2007 edition of the holiday portfolio trounced the averages. Of course, that won't happen every year, but it's nice when it does. Diversification, a focus on core growth names (generally with solid dividends) and avoiding areas where this investor doesn't have an edge are all good rules to follow, especially in challenging markets. Knowing all that, the 2008 portfolio isn't likely to surprise you.

Looking Ahead

I begin the 2008 season with two holdovers from 2007.

The first, Altria(MO Quote), will not surprise anyone who has read this column for the past several years. I continue to believe this consumer staples company provides terrific growth and income balance for a core equity investment portfolio, and management continues to provide solid leadership.

I will also keep Bank of America. The beaten-up financials deserve a look into 2008. While I could have picked any one of a number of financials, keeping BofA allows me to remain consistent. Moreover, I think the dividend is relatively safe, albeit with little growth into 2008.

	Recent Price	Price 12/31/2006	Price Change	Current Dividend	Current Yield	Yield At Cost
Altria (MO:NYSE)*	$76.00	$64.41	17.99%	$3.00	3.95%	4.66%
Archstone-Smith (ASN:NYSE)**	$60.75	$58.21	4.36%	--	0.00%	0.00%
Bank of America (BAC:NYSE)	$41.42	$53.39	-22.42%	$2.56	6.18%	4.79%
Carrizo Oil & Gas (CRZO:Nasdaq)	$54.51	$29.02	87.84%	$-	0.00%	0.00%
Microsoft (MSFT:Nasdaq)	$35.76	$29.86	19.76%	$0.40	1.12%	1.34%
Unweighted Average			21.51%		2.25%	2.16%
*Adjusted for Kraft Transaction **Purchase price in private transaction Source: Company Reports, Bloomberg, TSC Research

Energy remains an important economic theme, and this year's holiday portfolio entry is Cheniere Energy Partners(CQP Quote). The Master Limited Partnership owns the Sabine Pass LNG terminal, which is scheduled to open midyear; it is the first LNG regasification facility built in the U.S. in more than two decades.

Imported natural gas will become a much more important part of domestic energy supply in the coming years, and Cheniere's MLP should benefit. Moreover, the current yield -- nearly 11% -- is already escrowed in 2008 and then backed by quality contracts, providing a nice cushion for patient investors. (I own this stock, and my firm has provided corporate finance services for the company in the past year).

	Recent Price	Current Dividend	Current Yield
Advanced Micro Devices (AMD:NYSE)	$7.35	--	--
Altria (MO:NYSE)	$76.00	$3.00	3.95%
Bank of America (BAC:NYSE)	$41.42	$2.56	6.18%
Cheniere Energy Partners (CQP:AMEX)	$15.80	$1.70	10.76%
Equity Residential Properties (EQR:NYSE)	$37.04	$1.93	5.21%
Unweighted Average			5.22%
Source: Company Reports, Bloomberg, TSC Research

While the real estate market has been soft, the apartment REITs present an interesting contrarian play. This year I'll use Equity Residential Properties(EQR Quote). Part of the Sam Zell real estate empire, Equity Residential has more than 600 multifamily properties in 25 states.

An interesting fallout from the subprime and mortgage challenges may well be more demand for apartments as marginal homebuyers return to the rental market. In addition, EQR's 5.25% dividend seems safe and is likely to grow marginally in the New Year.

Finally, I will add a speculative technology play to the portfolio, Advanced Micro Devices(AMD Quote). Near its 52-week low, AMD is clearly the most speculative name ever placed in the holiday portfolio. However, believing that any good news will help the stock rally, combined with a generally positive view of the computing technology market, AMD will -- if nothing else -- provide some good commentary for the year ahead.

I will add more commentary on each of the five names in the portfolio come the second holiday of the year, Martin Luther King Day, Jan. 21.

Until then, Happy New Year! May all your investment and personal wishes come true in 2008.