Holiday Portfolio: Some Broken Eggs

Rotten Eggs!

That's not a bad way to describe the market-to-date in 2008. As we hit Easter weekend, concerns over liquidity, the economic outlook and, as a result, earnings performance in 2008 have most investors running for cover. If the fear over fundamentals wasn't enough to scare you out of the market, the volatility of this week probably was.

Thank goodness for a four-day week. However, that also means its time to take a look at the holiday portfolio, a group of five stocks that know all too well the meaning of volatility and the hostility of the market.

Before doing so, lets take a quick look at the rationale behind the holiday portfolio.

From January to December

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.

Holiday 2008: Rotten Eggs in Unusual Places Dividends, Diversification Help But Market is Tough
	Recent Price	12/31/2007 Price	Change	Current Dividend	Current Yield
Advanced Micro Devices (AMD:NYSE)	$6.15	$7.35	-16.33%	--	--
Altria (MO:NYSE)	$70.52	$76.00	-7.21%	$3.00	4.25%
Bank of America (BAC:NYSE)	$40.02	$41.42	-3.38%	$2.56	6.40%
Cheniere Energy Partners (CQP:AMEX)	$15.10	$15.80	-4.43%	$1.70	11.26%
Equity Residential Properties (EQR:NYSE)	$41.21	$37.04	11.26%	$1.93	4.68%
Unweighted Average			-4.02%		5.32%
Source: Company Reports, Bloomberg, TSC Research

Constructive Living

It's nice to be able to point to at least one member of the portfolio family that shows gains so far in 2008. Equity Residential Properties(EQR) is up over 11% so far in 2008. This apartment REIT with a national footprint was the brainchild of Chicago investment mogul Sam Zell. Interestingly, apartment REITs may be a meaningful beneficiary of the difficult credit markets as home purchases slow and lending standards tighten. Occupancy -- especially at middle-tier apartments that make up a significant portion of Equity's portfolio -- should rise for apartment owners and the demand may actually help support rental rates in an otherwise difficult economy.

Moreover, management is solid, the dividend appears safe and the company is likely to get plenty of looks to grow.

The Others

It's hard to say anything that hasn't already been said about the financials. Bank of America (BAC) is down only 3.4% on the year, not bad considering the panic among many financials. Even with the Countrywide(CFC) hangover, Bank of America remains a stable financial institution that will survive this downturn and, like other banks, stands to benefit from widening credit spreads in the coming months. While it will take time, investors are likely to look back 12-24 months from now and celebrate owning quality banking institutions in this market.

Cheniere Energy Partners(CQP) has been punished recently from fears of too much liquefied natural gas storage capacity in the U.S. However, contracts from Chevron(CVX) and Total(TOT) that will pay whether or not the terminal is used for 20 years provide good coverage of the dividend. The Sabine Pass LNG facility is scheduled to open in April and the opening will likely be good news for this stock. The 11.5%-plus dividend is hard to ignore.

Advanced Micro Devices(AMD) has been punished with the tech market and is the largest loser in the portfolio. It can be difficult to own a market laggard in times like this, but patience has always been a virtue when owning volatile technology names.

Altria's(MO) slide is also painful as many view this stalwart consumer name as defensive. However, no company is immune from broad market challenges. Yet, with a yield back above 4%, Altria is on sale and, like Bank of America, the strong yield is likely to help support this stock at or near current prices.

Anyone who thought equity investing was easy knows better now. However, with challenges -- and lower prices -- come plenty of opportunities, many of which can be found in a dividend-supported, diversified portfolio.

The holiday portfolio is just that and suggests that both diversity and dividends can help a lot in a difficult market. Stay nimble, true to your discipline and focused on what's most important in this market.

Happy Easter.

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