STREETWISE: Stocks to gobble for Turkey Day

Buying low at this time of year is rarely a problem. Going back as far as 1952, the equity market performance between August and October has been, on average, the worst three-month period of the year.

For Legg Mason Inc. in Baltimore, this represents the perfect time to reintroduce its famed Thanksgiving list of stocks to buy now and hold throughout the upcoming year.

Twenty-five years ago, when Legg Mason began releasing a list of 12 Thanksgiving stocks, they were merely recommendations tossed out to the investment community. This year, after a three-year hiatus, the list has emerged as a defined portfolio that can be purchased through Nov. 29 for a minimum investment of $1,000, or $250 for IRA accounts.

“It’s what the brokers want,” says Richard Cripps, Legg’s chief market strategist charged with selecting the stocks for the new Prime Opportunity Portfolio.

The concentrated portfolio, which contains stocks from at least six different Standard & Poor’s 500 stock index sectors, is designed to represent a mixture of core global franchise stocks and more-aggressive growth stocks.

The stocks include AT&T Corp., AT&T-Liberty Media Corp., Best Buy Co., Bristol-Myers Squibb Co., Cendant Corp., Chase Manhattan Co., Exodus Communications Inc., Microsoft Corp., Motorola Inc., Pharmacopeia Inc., Technitrol Inc. and Textron Inc.

“We didn’t want a tech wreck list,” Mr. Cripps says. “We were trying to be opportunistic.”

The portfolio is opportunistic on a couple of levels, according to Mr. Cripps.

He believes buying is at a historically low period for equities, and the investment environment going into 2001 will be more “valuation conscious.”

“For the most part, the stock market rises when the economy expands, earnings grow, and interest rates are steady to lower, which is the scenario we envision,” he says.

And within his forecast are sector-specific scenarios: “We believe it is reasonable to expect energy prices to decline, the euro to strengthen, and the significant disparity in equity valuation between the one-third of the stock market in technology and the two-thirds that isn’t,” he says.

When the portfolio began trading Oct. 25, the individual stocks were down, on average, 45% from their respective 52-week highs. As with a mutual fund, the portfolio’s daily performance can be tracked online.

But unlike a mutual fund, the portfolio will carry no cash, and there will be no turnover unless a company in the portfolio is acquired.

The defined-portfolio model is not unique to Legg Mason. Historically called unit investment trusts, which included an emphasis on fixed-income securities, the defined portfolios are becoming increasingly popular ways to deal with capital gains issues while concentrating on specific sectors or indexes.

Legg’s Prime Opportunity Portfolio, for instance, has a 13-month life span as a means of protecting investors from short-term capital gains. When the portfolio expires, investors can either cash out, take delivery of the underlying stocks or roll the assets into next year’s Thanksgiving portfolio.