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As we use this holiday Monday to take a look at the

Holiday Portfolio, it's hard to imagine a better descriptor than "labor" for these markets.

Call it what you want -- the subprime crisis, the housing bubble or the liquidity challenge -- the month of August was laborious for nearly all investors. As one longtime fund manager (and good friend) said Thursday, "Challenging markets come and go but truly confounding markets like this are incredibly rare."

Indeed! If anything can be said of August 2007, it's that it has been confusing: What should work, hasn't; what


work hasn't, either.

That said, it's markets like this that provide longer-term opportunities. Moreover, they can make you a better investor.

The Holiday Portfolio has experienced its share of challenges since

the July 4 holiday. Before we take a look at the specifics, let's review the purpose of the portfolio.

Good or Bad: 365 Days

The concept behind the Holiday Portfolio is straightforward: I select a group of five stocks that I believe 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 in


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.

Today, we review the five stocks selected at the beginning of 2007 and the outlook over the coming weeks.

Leaders ...

The leaders in this edition of the Holiday Portfolio have remained at the head of the pack most of the year.

The biggest winner to date has been

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TheStreet Recommends

Carrizo Oil & Gas

(CRZO) - Get Carrizo Oil & Gas, Inc. Report

, a natural gas-focused exploration company with operations in the Barnett Shale of Texas and the along the Gulf Coast.

As noted in the July 4 version of the Holiday Portfolio, Carrizo received mixed results from its Gulf Coast wildcat well, Mega Mata, which deflated much of the speculation in the stock. That said, in the mid-$30s, Carrizo is worth another look with its solid production profile in the Ft. Worth basin and potential growth in two new areas for the company: the Floyd Shale in Mississippi and North Sea exploration. Yet, it's fair to say most of the "easy money" was made early in the year in Carrizo.

There is little that hasn't been said about


(MO) - Get Altria Group Inc. Report

. The consumer products company should be a staple of just about any portfolio with its solid, steady growth profile and consistent dividend growth. Like it or not, Altria is about making money and that continues to translate into solid share performance.

... and Laggards

Our financial entrant in this year's Holiday Portfolio,

Bank of America

(BAC) - Get Bank of America Corporation Report

, has certainly felt some pain from the recent market volatility. While not completely unscathed, BofA is likely to come through the current financial turmoil without major damage. Moreover, the 5% yield provides a nice cushion for investors.


(MSFT) - Get Microsoft Corporation Report

continues to lag just about every benchmark. Whether you're comparing the stock's performance to the broad market or its technology peers, it is becoming more apparent that big is not better when it comes to technology. While Microsoft products remain a pervasive part of the average American's technology experience, translating that into shareholder value has proved evasive for the world's leading software company.

Still, Microsoft has loads of cash, continues to see growing adoption of the new Vista operating system and will benefit from what appears to be a 2008 computer upgrade cycle. Look for new management team members to refocus the company on creating shareholder value in the coming months. If right, it will pay to be patient; if not (and I haven't been right on this name for some time), more of the same underperformance is likely.

Archstone: The Acquisition Rule Works

The final member of the 2007 portfolio is


( ASN), a REIT that is currently in the final stages of closing a sale to a group of investors led by real estate concern Tishman Speyer and Lehman Brothers.

After announcement of the deal in late May, I suggested in July that taking profits on an M&A announcement is a good discipline. In this case, that was exactly the correct call. Since the announcement, the stock peaked at about $62 per share and proceeded to drop to $54 per share.

While I continue to believe the deal will close, probably in mid-October, there remains some risk, especially given the recent turmoil in financial markets. As such, there is no investment call here. We will replace Archstone-Smith in the portfolio once the acquisition is complete.

New Markets, Same Rules

When markets become difficult, it's sometimes easy to forget -- or even abandon -- the discipline that is developed in more sane times. It's important to remember that investing is a long-term process and with challenges come opportunities.

The end of summer and a market that may make little sense provide two good reasons to review your investment plan and make sure you are still on-track. Over the past decade I have written extensively about strategy and the hallmarks that guide my investment decisions.

Take a few minutes and labor over your investment discipline this holiday. Not only will it help you rest better at night, it is likely to make you a better investor.

At time of publication, Edmonds had no positions in any of the stocks mentioned in this column, although holdings can change at any time.

Christopher Edmonds is managing principal at Energy Research & Capital Partners, an energy investment firm and an affiliate of FIG Partners. 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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