The Memorial Day holiday marks the unofficial beginning of summer and the hope that with warmer temperatures comes a hot market. It also provides a chance to review

the 2005 edition of the holiday portfolio.

This year has been a challenging one for the average investor. While the last two weeks have shown some signs of hope, few investors have posted returns that have made them green with envy. It's been a market in which defense wins games and a strong offense has been, in many cases, offensive.

Fortunately for the holiday portfolio, we expected choppy markets in the first part of the year and tried to build a portfolio with some nice dividend-producing equities that could cushion part of the rocky ride. We'll look at that strategy in this review today.

Before we look at the portfolio offerings, though, let's take a quick look at the genesis of the holiday portfolio concept.

A Portfolio for All Seasons

The concept of the Holiday Portfolio is simple. I select five stocks 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 occasionally comment on the stocks in

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 as summer begins, let's take a quick look at the stocks that make up the holiday portfolio and their performance through two seasons of the year.

Building Blocks

Equity Office Properties

(EOP)

, one of the largest office-property real estate investment trusts in the U.S., has posted the best numbers to date in the holiday portfolio.

The outperformance is the result of two items. First, the outlook for commercial office properties has improved in the first six months of the year as the economy shows signs of slow yet steady improvement. Second, there has been a focus on income-oriented equities as investors look for safe havens in an otherwise difficult market.

My patience with Equity Office over the last two years is beginning to pay off. Remember, I have received current income of roughly 7% while I wait for appreciation. Even today, this name makes sense for longer-term investors who are looking for stability with longer-term growth. A dividend of more than 6% provides plenty of support for conservative investors, while any improvement in the economics of Equity Office Properties' major markets -- especially the San Francisco and Silicon Valley areas -- will provide lease demand and rent growth, which should push shares higher over time.

Drugged

The most controversial pick of this year's holiday portfolio was

Pfizer

(PFE) - Get Report

. With this pharmaceutical giant's troubles at the end of 2004 and in the formative months of 2005, many questioned why I would venture into these murky waters.

At the time, I argued that Pfizer's stable of both prescription and over-the-counter products was much deeper than most pundits were willing to admit, and that the sentiment was so negative, it seemed like a good play for a patient investor. And that doesn't even give credit for what looks like a decent pipeline of drugs that should provide product ideas for the next several years.

The stock is up solidly from the beginning of the year, and while the company still faces meaningful challenges in the months ahead, including concerns about Viagra's side effects, management seems to be regaining its footing into the summer months. With a current yield of nearly 2.5% and the defensive nature of pharmaceutical stocks, Pfizer is still interesting.

Still Energetic

The energy name in the portfolio,

Superior Energy Services

TST Recommends

(SPN)

, has stumbled a bit since the Easter holiday but remains in positive territory. Choppiness in oil and natural gas prices caused some selling of energy stocks, but with the Memorial Day holiday representing the beginning of the busy summer driving season, it's again time to consider buying energy stocks.

From Superior's deep relationship with

El Paso

(EP)

to its ability to provide an integrated suite of workover and stimulation services to other exploration-and-production companies in the Gulf of Mexico, I continue to believe Superior's growth potential is strong in the coming year. Estimates have moved up a bit since

the Easter break, with 2005 consensus earnings estimates around $1.02 per share. I believe that number is still low, and that $1.05 to $1.10 is more likely. At that level, Superior is trading below 15 times earnings compared to the average energy service name that trades closer to 20 times current-year earnings.

That result doesn't include positive surprises from SPN Resources, the company's acquire-and-develop 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 $1.15 to $1.20 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 for energy stocks -- in the short run -- 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.

Technology and Financials on the Outs

Although both

Microsoft

(MSFT) - Get Report

and

U.S. Bancorp

(USB) - Get Report

are improving, they continue to drag on the holiday portfolio.

Microsoft was the readers' choice for the 2005 portfolio, and it has moved up nicely since being down more than 9% at Easter. The technology giant remains a solid core holding in the portfolio and should continue to perk up as the economy and markets work through the current malaise. Sure, the usual concerns about size and the ability to innovate remain, but I still like the cash position, the dominance in its industry and the company's continued ability to create new products that add value at both the consumer and commercial levels.

Along with most of the financials, including the regional banks, U.S. Bank has struggled and is now the real laggard in the portfolio. Yet the company's commercial loan portfolio continues to improve in both quality and demand. In addition, the company has been good at finding efficiencies that improve margins 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 portfolios.

The holiday portfolio has certainly perked up since the Easter break, but still has plenty of growth potential ahead. Let's hope that a hot summer also heats up the market -- at least the five stocks that still look like good buys in the holiday portfolio.

Have a great and safe Memorial Day.

At time of publication, Chris Edmonds was long Equity Office Properties, U.S. Bancorp and Pfizer, 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 appreciates your feedback;

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