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Happy Fourth of July! The first six months of the year have provided some fireworks for the markets, and this Holiday Portfolio has also seen its share of both sparklers and smoke bombs.

When I first assembled this portfolio, I was looking for five stocks that would provide good, balanced performance in a year when I thought the economy would improve. I wanted to combine the stability of income-producing equities with companies that were poised to benefit from economic growth. For the most part, that strategy has worked, and I'd still be comfortable holding any of these stocks. (I do own


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Equity Office



Before I take a closer look at the five components, let's briefly review the purpose of the Holiday Portfolio.

All Year Long

I launched the first Holiday Portfolio three years ago, hoping to craft a column for each market holiday that would track a concentrated portfolio of core equities for an entire year. In doing so, it gives me -- and you -- the chance to think longer term about the fundamentals of a company's business as well as its industry. I follow these five stocks -- regardless of their performance -- throughout the year. 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 should serve not only to provide a forum for more in-depth discussion of investment decisions and company strategy, but also to reinforce the importance of ongoing portfolio analysis. In addition, through occasional comments on the stocks in


Columnist Conversation, it enables me to look at both short-term trading strategies and longer-term investment strategies with the same stocks.

This year's twist is the readers' selection. On

New Year's Day, I asked you to review the stocks you routinely follow and send me your best idea for the portfolio. After a lengthy elimination process, you picked


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TheStreet Recommends

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, the American Idol of the Holiday Portfolio.

Here's a quick recap of how these stocks have performed since the portfolio's inception:

Working to Build Momentum

The stepchild of the portfolio is Equity Office, the U.S.' largest office-focused real estate investment trust (or REIT) that's run by Sam Zell. The REIT now owns more than 700 properties, totaling 120 million square feet of office space from coast to coast.

Although the massive real estate holdings are impressive, they're also a drag on performance when millions of square feet of office space sit empty around the country. That's especially true in areas like Northern California, to which Equity Office made a large commitment through acquisitions near the top of the last property cycle.


written recently about the challenges facing the office market, but it should improve along with the economy, albeit at a slightly delayed pace. While Equity Office has struggled with fundamental real estate issues in the first six months of 2004, signs of a slow recovery are emerging in many major markets.

Until the recovery really kicks in, Equity Office is positioning its portfolio to benefit from future growth, selling noncore properties and looking at acquisitions in promising markets. Challenges remain, but the company did see a reduction in tenant-improvement costs and early lease terminations in the first quarter, typically a sign of future operating improvements. This week, Equity Office also announced an increase in its share-repurchase program, a sign that management believes its own equity is a solid investment.

Concerns remain that the company may not earn enough to cover its dividend in 2004. Although the dividend may not be hiked anytime soon, management is committed to maintaining the current dividend level through the downturn. Things are slowly improving, and the stock price is creeping higher.

Pfizer has slipped a bit since our

Memorial Day review. However, the company continues to benefit from blockbusters like Lipitor, Norvasc, Celebrex and Xalatan. On the weak side, Viagra and Zithromax both posted underwhelming performance in the first six months of the year. While patent expirations are always a concern, Pfizer's pipeline looks decent, making it a nice Big Pharma choice for long-term investors. Its second quarter should be in line with expectations.


By far, the portfolio's top performer to date is ConocoPhillips, which is up more than 16% since January, yet still sports a 2.25% yield. It's smaller than


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Royal Dutch


, but ConocoPhillips is in the sweet spot of the oil and natural gas business.

With good exploration opportunities and a strong midstream and retail component, the company has gotten real profit power from oil prices at $40 and natural gas prices at $6. More important, ConocoPhillips will post terrific results even if oil goes to $30 and natural gas goes to $5.

The company did guide quarterly production lower in the past week, although the reasons appear both reasonable and temporary. Refining margins and high commodity prices should still boost cash flow and earnings to solid levels.

While giving up a bit of ground,

First Horizon

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keeps holding its gains. It has changed its name from First Tennessee to eliminate its geographic label, and the company continues to show growth in its traditional banking business as well as its capital markets business.

It's also improving its financial metrics and should keep benefiting from an improving economy. Also, as my

Street Insight

colleague Doug Kass has mentioned on a number of occasions, a number of larger regional banks would love to own First Horizon, something to consider in the coming months.

As the market and economy go, so goes

General Electric

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. The stock is up slightly from Memorial Day, but the story remains unchanged. GE is a play on a recovery in the broad market and economy, so it should perk up as the market does in the second half.

At the midway point of 2004, ConocoPhillips provides the real bang. First Horizon and GE are sparklers, while Pfizer has a way to go. The only dud, Equity Office, may well burst into more brilliant colors by year-end.

Remember to keep your fingers away from the fuse, run like heck after lighting and be very, very safe. Have a great holiday!

At time of publication, Edmonds was long Equity Office, ConocoPhillips and ExxonMobil, although holdings can change at any time.

Christopher S. Edmonds is vice president and director of research at Pritchard Capital Partners, a New Orleans energy investment firm. He is based in Atlanta. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to