As we take a break for the Easter and Passover holidays, an old saying seems quite appropriate: Don't put all your eggs in one basket.

Our diversified portfolio of five stocks should provide us with all-weather opportunities. Given the economic crosscurrents, concerns over lending and housing issues and recent geopolitical events, I believe a basket of stocks with solid growth potential as well as a current income buffer is likely to offer a good, risk-averse return in various economic environments.

So far, so good.

Before getting into specifics, let's take a quick look at the purpose behind the Holiday Portfolio, now in its sixth iteration.

Across All Seasons

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

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 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 will 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'll review the five stocks selected at the

beginning of 2007 and the outlook over the coming weeks.

Here's a quick look at how they've performed so far.

Energize With Carrizo

The clear winner in the first quarter of 2007 is

Carrizo Oil & Gas

(CRZO) - Get Report

, a small-cap natural gas producer focused on the shale plays of Texas, Arkansas, Alabama and Mississippi. Carrizo shares are up more than 20% year-to-date on anticipation of continued growth in Texas' Barnett Shale and the growth potential for the Floyd shale play in Mississippi and Alabama, which is in its very early development stages.

Carrizo may also benefit if its exploration efforts along the Gulf Coast of Texas and Louisiana are successful. The company is testing a 20,000-foot-plus exploration well that could lead to the discovery of a field with more than 500 billion cubic feet of natural gas reserves. Although the well is high-risk, the majority of the costs have been paid by Carrizo's partner,

Petrobras

(PBR) - Get Report

. Results from this well should come in sometime before Memorial Day. If successful, it could be significant for Carrizo shares. A disappointment may cause a temporary, minor setback for the company.

The real opportunity for Carrizo in 2007 lies in its shale plays. In the Barnett, it continues to grow reserves and production as it becomes more efficient at drilling and producing there. In the Floyd shale, it's early in the process, so success is more difficult to predict. Yet, Carrizo's nearly 150,000 acres in the play provide plenty of exploration and development opportunity in the months to come.

Altria: A "Krafty" Move

Taking second place among the portfolio's best performers is

Altria

(MO) - Get Report

, the consumer goods conglomerate. Completing its

Kraft

( KFT) spinoff is just the latest in a string of management decisions that have created value for shareholders, a concept on which Altria appears to have written the book. I have adjusted the cost basis and current price in the accompanying table to reflect the Kraft transaction.

Altria is a very simple story: Solid cash flow, good management and an ever-growing dividend. The risk is from tobacco litigation and a small amount of cyclical economic risk. For now, however, it's hard to find a better all-weather stock for a portfolio than Altria.

Diversification Works

The rest of the portfolio has been lethargic lately, even though the companies remain solid inclusions. Regardless, because it's broadly diversified across sectors with differing levels of economic sensitivity, the overall portfolio continues to outperform the broader market.

Despite the impact from the subprime market, money-center

Bank of America

(BAC) - Get Report

should emerge without meaningful damage. Moreover, the stock provides a safe income stream that pays you to wait for the next leg up in the bank sector, which should come before year-end.

Microsoft

(MSFT) - Get Report

continues to show its stodgy side. The stock is down nearly 4.5% on the year, largely on concerns about the slow adoption of Vista, the lack of momentum for a new product cycle and the European Union's push for more open architecture.

Nobody can be really surprised about Vista's compatibility issues in the early stages. While it may take time to work through the kinks, Vista will be successful and, over time, Microsoft will be the winner. I also still believe we're in the early days of a software-upgrade cycle, which ultimately will make its way through millions of computer users and provide incremental revenue -- and income -- for Mister Softee. Patience here is likely to pay off later in 2007.

Finally,

Archstone-Smith

( ASN) has traded lower since an early March downgrade of its shares and those of other economically sensitive REITs. A slower economy could impact the ability of the real estate investment trust to raise apartment rents and increase vacancy rates in key markets, at least slowing growth in the short term.

That concern is valid, but I still believe that Archstone's higher-end apartment offerings are less prone to economic swings than those of some of its peers. Its current 3.3% yield looks safe in the current operating environment.

While three of the names in the portfolio aren't making the grade, at least in the most recent quarter, this diversification strategy is paying off and giving us a passing grade. A more stable market with better visibility for growth should help our laggards catch up in the second half of the year.

Have a great holiday. May all your eggs be golden!

At time of publication, Edmonds had no positions in the stocks mentioned, although holdings can change at any time. His firm is a market maker in Carrizo.

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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