The second market holiday of 2004 comes barely three weeks into the new year, but on this day of remembrance for Martin Luther King Jr., I'll aim to provide a snapshot of early action in the markets.
Even without year-end earnings, you can get a good feel for early sentiment during the first few weeks of the year. In fact, I've always paid close attention to the first 10 trading days of each year and the hints they offer about the tone of the market and the stocks that are most interesting to me. So let's do that for the Holiday Portfolio, which was introduced on
New Year's Day.
First, here's a quick review of the Holiday Portfolio strategy.
All Year Long
The concept of the Holiday Portfolio is simple. I select a group of five stocks that I think 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 on
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 longer 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.
The Names to Date
Equity Office Properties
is a holdover from last year's portfolio. It's the largest publicly traded office landlord in the U.S., and it needs to see a rebound in both rental rates and occupancy. Investors seemed ambivalent at the pace of such a recovery, and that is likely to make Equity Office a second-half story.
Equity Office makes sense for income investors who are willing to wait for the recovery. Although the 7% yield won't likely be increased this year, it appears relatively safe. The company's solid management team will make the most of both property sale and acquisition opportunities.
Another holdover from 2003 is
, largely a play on continued strong energy prices and the need for more natural gas and oil supply. Moreover, I believe the synergies of the Conoco-Phillips combination are finally in place to make 2004 a good year for earnings growth.
Finally, ConocoPhillips' partnership with
could expand, giving this midmajor a chance to be a leader in the development of new natural gas infrastructure on the Gulf Coast.
has performed well so far this year, as many bank stocks have rallied in January. I think this regional bank could not only be a surprising play on an economic recovery but also see a surprising boost in earnings from fee income and improved operating efficiencies. Plus, the 3.6% yield certainly doesn't hurt.
started the year strong on the back of a good fourth-quarter earnings report and outlook. The stock is up more than 7% so far in 2004. I selected General Electric for an economic tell, a combination of businesses that will help us gauge how well the stock market tracks the economic recovery.
The Readers Speak
On New Year's Day, I asked readers to come up with their best ideas for 2004 that would fit with the Holiday Portfolio mantra of buy and hold. I was overwhelmed by more than 50 suggestions for the fifth name in the portfolio. As such, I've narrowed it down to five stocks, and I'm asking you to vote for the stock most deserving of inclusion. Choose one of the five stocks --
-- and vote in the poll below.
In a special column later this week, I'll take a look at the results and add the fifth stock to the portfolio. Also, I'll review the earnings outlooks for each company still to report year-end results for 2003.
Until then, Happy MLK Day.
At time of publication, Edmonds was long Equity Office and ConocoPhillips, 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