Holiday Portfolio: It's a Mixed Basket - TheStreet

The Easter holiday is upon us, spring is in the air, egg hunts are on kids' agendas and it's time once again to review the 2005 holiday portfolio.

So far in 2005 the market has been tough and there aren't many good eggs -- we'd all like a couple of those plastic eggs my parents used to hide a quarter or two inside -- to be found in our group of five. However, anticipating some choppy market activity, the choice of dividend-producing stocks has helped stabilize the portfolio in the first three months of the year.

Before we take a look at the portfolio offerings, let's take a quick look at the birth and rationale behind the holiday portfolio concept.

A Portfolio for All Seasons

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

RealMoney's

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.

So, as you sit back and enjoy a day off in the middle of winter -- or on the beach if you are somewhere warm -- let's take a quick look at the stocks that make up the holiday portfolio and their out-of-the-gate performance.

Energetic

About the only stock that has consistently worked this year -- at least until this week -- is energy and our small-cap energy entrant,

Superior Energy Services

(SPN)

. It has served to be the clear good egg of the portfolio to date.

From Superior's deep relationship with

El Paso

(EP)

to its ability to provide an integrated suite of workover and stimulation services to other E&P companies in the Gulf of Mexico, I continue to believe Superior's growth potential is strong in the coming year. Most estimates call for the company to earn about 90 cents to 95 cents in the coming year; but I think results should be north of $1.00 per share. If that is true, the stock should trade to $20 or better in the course of the next 12 months.

That result doesn't include positive surprises from SPN Resources, the company's subsidiary that has a number of opportunities for new production and revenue in the coming year. If SPN Resources can click on all cylinders, earnings could push $1.05 to $1.10 a share (run rate) in the next 12 to 18 months, providing more upside for Superior.

Of course, timing is important here and the recent pullback in commodity prices has had an impact on energy equities. It will be difficult in the short run for energy stocks to move higher as commodity prices are under pressure. However, once oil settles at an "equilibrium" price that I believe to be somewhere north of $40 per barrel, Superior should continue its solid performance.

Building on the Economy

Equity Office Properties

(EOP)

, one of the largest office-property real estate investment trusts in the U.S., continues to hold its own in a sloppy market and is showing signs of improvement as the economy slowly improves. As noted here over the past two years, I have been willing to be patient with Equity Office because of its 7% yield and its solid management team.

While the company will continue to face challenges that come with excess office capacity in some of its markets -- especially the San Francisco Bay area -- these spaces should find new tenants as the economy improves. Meanwhile, there are slow yet steady signs of better demand fundamentals in most of its markets. It will continue to take time but the dividend continues to make Equity Office worth the wait for patient investors.

Technology, Money and Pharma Drag

The worst-performing stock in the portfolio is

Microsoft

(MSFT) - Get Report

, the readers choice for the 2005 portfolio. While down more than 9% year to date, this is still a solid core holding in the portfolio and should begin to perk up as the economy and markets work through the current malaise. Sure, the usual concerns about its size and ability to innovate remain, but I still like the cash position, the dominance in the industry and its continued ability to create new products that add value at both the consumer and commercial levels.

Along with most financial stocks, including the regional banks,

US Bancorp

(USB) - Get Report

has also traded sloppily in the past month. However, there are still solid signs of improvement in the commercial loan portfolio -- both quality and demand. In addition, the company has been good at finding margin-improving efficiencies as it continues to integrate a number of mergers over the last several years. The weakness is an opportunity for long-term investors to consider this quality regional bank for their portfolio.

Finally,

Pfizer

(PFE) - Get Report

remains dogged by the legal and pragmatic problems related to Celebrex and the uncertainty of other drugs in Pfizer's portfolio.

I still believe Pfizer has a solid stable of products and, continued concerns over Celebrex notwithstanding, this should be a name that manages to gain traction at points during the year. Of course, that is absent some other major revelation that might question the company's way of doing business. If you want some comfort regarding Pfizer's reach, walk through your local drug store or pharmacy section of your local grocer and look at the over-the-counter products that are Pfizer-branded. If you are like me, you will be amazed -- and somewhat comforted -- by the reach of the company's brands.

That said, as I mentioned in February, this is not a name for the faint of heart. If you own it, I'd suggest you utilize methods to protect yourself from additional bad news. Whether through puts or selling calls above the original position price, creating a stream of income will help if you believe time is all that is needed to rebuild investor confidence. As I noted in

my New Year's column, this is a story that will take time but one I believe that, over time, will turn out to be the right call.

Hopefully, we'll get some good eggs after Easter. Have a great holiday weekend and we'll catch up with the holiday stocks next at the Memorial Day break.

At time of publication, Edmonds was long Equity Office Properties, Microsoft, Pfizer and US Bancorp, 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

cedmonds@thestreet.com.