Holiday Portfolio: What a Bunch of Turkeys

A Difficult Economy

With the unraveling of the credit markets and economy, economically sensitive stocks have taken a pounding, including three entries in the holiday portfolio. We address each, in turn.

Advanced Micro Devices (AMD Quote) was a bet on a renewed PC cycle and the possibility that technology would move in AMD's favor. Neither has happened, and the stock has suffered. While it looks potentially cheap, so do many other names, including Intel (INTC Quote), which will lead the chip market once the market begins to recover. I see very little reason to be in AMD at this point, although we will report one more time come the Christmas holiday.

Bank of America (BAC Quote) may be one of the more interesting prospective plays in the portfolio. While the carnage in the bank space is far from over, Ken Lewis has done a surprisingly solid job of navigating a very choppy sea. Moreover, if it gets done, the Merrill Lynch acquisition would put B of A in a position to make significant gains through customer convergence and cross-selling. While the strongest bank in the super-regionals appears to be U.S. Bancorp (USB Quote), Bank of America looks poised to have another day in the sun once we weather the final stages of the bank storm.

The final of the economic calamity trio is Cheniere Energy Partners (CQP Quote), the master limited partnership that holds the Sabine Pass LNG (liquefied natural gas) receiving facility. With the decline in energy prices and natural gas demand, the increase in domestic natural gas supply, and the overall malaise in the energy markets, this upstart high-yielder has run into concerns over survival. While the LNG market will likely be soft in the coming months, contracts with major integrated companies will likely help support this company in the coming quarters. Not a name for the faint of heart, and there is significant credit risk, but it could be an interesting, highly speculative yield play if you do your homework and understand the risks.