President's Day means two things: the approach of spring and the second installment of the Holiday Portfolio.
The 2006 edition of the portfolio is about flat on the year, a market-lagging performance that hardly qualifies as presidential. But a dividend kicker -- these stocks offer an average yield of just about 3% -- eases the pain, and I expect to see these plays do better as the year rolls along.
The concept of the Holiday Portfolio is simple. I choose five stocks and readers pick one, and then we all follow them throughout the year. I revisit the portfolio on each market holiday and, at times, comment on the stocks in RealMoney's Columnist Conversation. A stock is removed from the portfolio only if it is acquired or otherwise drops off a major exchange.
The portfolio serves two purposes. First, it follows the fundamental progress of a group of stocks over a year, providing a forum for in-depth discussion of investment decisions and company strategy. This process should reinforce the importance of ongoing portfolio analysis. Second, it provides an opportunity to compare short-term trading strategies and longer-term investment strategies, using the same stocks.
So, as you sit back and enjoy the day -- maybe on the beach, if you're lucky enough to be somewhere warm -- let's take a quick look at the stocks that make up the holiday portfolio and their out-of-the-gate performance.
Lack of Energy
The most challenged name so far is
, one of North America's leading natural-gas exploration and production companies. Chesapeake has suffered from a decline in energy prices as well as a bit of sector shift. It's down almost 7% for the year, while the broad S&P 500 is up just over 3%.
In addition, the company's co-founder, president and chief operating officer, Tom Ward, resigned earlier this month, leaving investors to ponder the future of the Oklahoma-based energy company. While Ward's departure leaves big shoes to fill, my discussions with those close to the company suggest Ward just wanted to be with his family. Chesapeake's bench is deep and the company should continue to thrive under the leadership of Aubrey McClendon.
While gas will be volatile in the coming weeks, Chesapeake is the pure play on the future of the natural gas market, one I continue to like.
On a happier note is
, up 11% this year. Sure, the stock is still way down over a couple years, but it looks interesting here. Talk of new drugs and hope for better patent protection (we'll see about that one) have helped to boost the outlook. There is still plenty of work to do, but I continue to think longer-term investors need exposure to health care. Big pharma is cheap right now and offers healthy yields, which makes the sector a place to have some exposure. The recovery may be a bit choppy, but I like what I am seeing.
Speaking of smoke,
is down 2%. But the business remains healthy and the company is focusing on shareholder value. And again, the dividend provides plenty of protection for patient investors.
The other two names I put in the portfolio --
-- have basically tracked the markets. They should differentiate themselves as the year progresses.
Bringing Good Things to Light
I was overwhelmed with suggestions for the readers'-choice component of the portfolio. The clear winner, though, was
Sure, it's not as sexy as some of the smaller, more sector-focused picks. But it should give us some exposure to U.S. and global economic trends. Plus, I think this company may find some surprising catalysts, both in acquisitions and divestitures. So far, GE is down 5%.
There you have it -- another holiday, another update. If not presidential, it's a solid group of six stocks that will likely serve us well in the coming months.
Have a great holiday.
At time of publication, Edmonds was long Altria and Pfizer, although holdings can change at any time.
Christopher S. Edmonds is a partner and managing 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 appreciates your feedback;
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