As the holidays wind down, we reflect on the year that was and think ahead to the always-optimistic New Year's resolutions. A better-performing portfolio always ranks up there with a diet. So, to help with the portfolio (I've never been much help in the diet department), I present this New Year's Day the fourth edition of the Holiday Portfolio. We entered 2004 on a very optimistic note. While there were moments of grandeur for the markets in the past year, it was not easy making money. Although many investors did better than 2004's iteration of the Holiday Portfolio, total return with dividend was in the double-digit range. That wasn't bad for a difficult year, but I always want better. The past year's focus on total return did pay dividends, so to speak, and those dividends helped in the performance category. While dividends again will be part of the Holiday Portfolio, I think 2005 could be a surprisingly good year for the markets. That means dividends aren't likely to be as essential to solid portfolio return. Don't get me wrong; they remain important, but capital appreciation is likely to be more important in the coming year. That means not every stock I stick in this year's "fab five" has to pay dividends. Nonetheless, these stocks have to be solid companies that will be interesting to follow for the coming 12 months.
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 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 get your portfolio -- and perhaps yourself -- in shape this year (remember, diets can't start on holidays!), take a look at the five stocks in this year's Holiday Portfolio.