On this day reserved for the three F's -- family, friends and football -- it's time to revisit the Holiday Portfolio. After a slow start, the summer and fall have been good to equity investors. For that, we give thanks.
Before diving into specifics, let's review the purpose and process of the Holiday Portfolio.
Six Stocks, 12 Months
The concept is simple: I select a group of five stocks that I believe deserve watching over the next 12 months, readers pick one 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 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.
So, as you enjoy that extra turkey leg or second piece of pumpkin pie, take a look at the stocks in this year's bountiful basket.
The leading performer in this year's Holiday Portfolio is
, a Southern regional bank that has gotten a boost from a strong regional economy and a solid rally in many of the larger regional banks.
The stock has come in just a bit since
Labor Day, but remains a solid performer. Regional banks should continue to perform well, although Compass shares now trade more in line with its peers. Banks like Compass, especially with a strong branch network and good expense and bottom-line management, will likely keep getting attention into the new year.
The pharmaceutical group has also perked up over the past several months, and
has benefited from the rally. Up more than 15% since January, the stock finally looks poised to break a multi-year drought. With a solid pipeline of new opportunities, Pfizer remains a leader in the space. While Big Pharma will remain volatile, it's an important part of a balanced portfolio.
Third on the performance list is another perennial laggard,
. The stock is up more than 14% year to date and has shown some signs of sustained interest. While a new product cycle didn't happen in 2006, Mister Softee does hold some promise for new products in the coming year, and new alliances may present opportunities for patient investors.
rounds out the quartet of double-digit gainers in the portfolio. Although the
spinoff may be delayed until 2007, Altria hiked its dividend earlier this year as well as its more recent guidance. While the Kraft delay may be unnerving to some, it does provide a potential catalyst into the coming year. I know many readers have issues with owning shares of a tobacco company, but it's legal, and my job here is to help you make money. In short, Altria's cash creation is a money maker year in and year out.
All six names in the portfolio are now in positive territory, but two are trailing behind the rest.
, one of the nation's largest -- and smartest -- natural gas producers, remains stuck in the mud, a result of volatile natural gas prices and the company's aggressive acquisition posture.
Those variables may have temporarily stalled this stock, but CEO Aubrey McClendon has skillfully positioned this company. That effort should pay off beginning in 2007 as Chesapeake begins to harvest the assets from recent acquisitions. Of all the names in the portfolio, Chesapeake looks like the most attractive name to buy now, especially as it has sold most of the gas it will produce in 2007 at prices well above $8 per million British thermal units.
The readers' pick this year was
, a name that should generally track the economy. However, its diverse business lines -- one of the company's greatest strengths in a challenging market -- have become a liability. For many investors, this conglomerate has become too difficult to understand. That said, solid leadership and business units leveraged to the economy should help GE track the market in the coming months.
Holiday Portfolio Alumni News
One other company deserves mention in this Thanksgiving edition of the Holiday Portfolio.
Earlier this week,
Equity Office Properties
accepted an offer to be purchased by an affiliate of private-equity firm
The Blackstone Group
for $48.50 per share. As regular readers of this column know, Equity Office was a multi-year holding in the Holiday Portfolio, often cited as a solid dividend play with shareholder-friendly management. During the
early days of its mention here, the stock traded in the mid- to high-$20s.
The company, led by Sam Zell, proved its commitment to shareholders with this deal. Consistent with my long-held merger discipline, it's time to take profits and move on.
Speaking of Thanks
This Thanksgiving we all have plenty for which to be thankful, such as family, friends and freedom.
I am very thankful for the many relationships I have developed over nearly a decade at
. To my colleagues, sources and especially you the readers, thank you for making these 10 years so enriching.
May each of you and your families enjoy the best Thanksgiving ever.
At time of publication, Edmonds was long Equity Office, although holdings can change at any time.
Christopher S. Edmonds is 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;
to send him an email.