Happy New Year!With 2006 in the books and a new year beginning, resolutions and optimism are upon us. However, today is a day of celebration, football and good food and drink. (So much for some of those resolutions!) It's also a day to take one last look at the 2006 edition of the Holiday Portfolio. The past year was a tale of two markets. The first half was difficult for much of the market and for the stocks in the Holiday Portfolio. However, starting with Labor Day, the market seemed to sprint to year-end, and much of the Holiday Portfolio followed. While not all names participated in the year-end rally, the portfolio -- with its nice yield -- held its own against the broader market. Before our final review, let's take a look at the Holiday Portfolio's rules.
From January to DecemberThe concept is simple: I select a group of five stocks that I believe deserve watching over the next 12 months, readers add one pick, and I follow them all -- 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 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. So, as you enjoy this holiday, let's take a look at the portfolio.
Total ReturnGoing into the final trading day of the year, the Holiday Portfolio boasted a total return of 14%, including dividends. Although that's slightly behind the S&P 500, it is right in line with the broad market, which feels pretty good in a year like 2006.
|Onward Into 2007 |
Here's one last look at the 2006 Holiday Portfolio
|Company & Ticker||Recent Price||Price 12/31/2005||Change YTD||Dividend||Yield at Cost||Current Yield|
|Chesapeake Energy (CHK:NYSE)||$29.37||$31.73||-7.44%||$0.24||0.76%||0.82%|
|Compass Bancshares (CBSS:Nasdaq)||$60.21||$48.25||24.79%||$1.56||3.23%||2.59%|
|General Electric (GE:NYSE)||$37.48||$35.05||6.93%||$1.00||2.85%||2.67%|
|Portfolio Performance Y-T-D||11.03%||2.97%||2.62%|
|S&P 500 Y-T-D||14.13%|
|Source: TSC Research|
The biggest victory of the year was recognizing an underappreciated regional bank with decent management, a good franchise and the opportunity to improve the position of its loan portfolio. Compass Bancshares ( CBSS) passed the test, benefiting from a strong Southern economy and a solid rally in many of the larger regional banks. Compass now trades more in line with its peers, but the group should continue to do well. Banks like Compass, especially those with a strong branch network and good expense and bottom-line management, should keep attracting attention in the year ahead.
Taking second place this year is Altria ( MO). This consumer conglomerate (call it a tobacco company, if you wish) remains a key member of many consumer portfolios. It is a stalwart in both good and difficult markets, a result of robust cash flow and its history of consistently hiking its dividend every year. This could well be another solid year for the company as it works toward the spinoff of Kraft ( KFT). Yes, Altria is a tobacco stock, so if you can't deal with owning tobacco, then don't own this name. But it does post solid results, and that's what makes a stock rise. Third place in the Holiday Portfolio goes to Microsoft ( MSFT), a name that many were ready to write off earlier in the year. Mister Softee could be in for another solid year, especially if the bugs from Vista are worked out and the long-awaited technology upgrade and replacement cycle finally begin. In fact, we may get a chance to revisit Microsoft during the holidays of 2007. In fourth position is the most volatile member of the Holiday Portfolio over the past month, Pfizer ( PFE). The pharmaceutical giant
dropped a bombshell in early December, saying it was discontinuing trials of its next-generation cholesterol drug, torcetrapib, due to unexpectedly high death rates. After slumping more than 10%, the stock rallied and gained recent support from a 20%-plus increase in its dividend and the appointment of the company's president to the additional role of chairman, replacing the outgoing Hank McKinnell.
That volatility will likely continue, but exposure to the health care sector through Big Pharma is an important part of a balanced, core portfolio. Pfizer remains a leader in research, with a focus on next-generation pharmaceutical applications. The reader's choice, General Electric ( GE), comes in fifth place. While the stock struggled a bit out of the gate in 2006, this could be a big year for the company's power and heavy industrial businesses as well as the health care segment. Absent an economic downturn, which would likely affect GE's diverse business mix, look for better things in the year ahead.
shoot me an email . This year, I'll pick what I consider to be the most compelling argument for a stock in the portfolio from one reader. So don't give me just a name; give me your reasons, too. Again, your comments, criticisms, compliments and interaction made 2006 the best year yet for RealMoney and TheStreet.com. May 2007 bring more of the same, and may all of your dreams turn into reality in the coming year.