There is one thing you don't want to do going forward, and that is forget about oil. Once again, it's back over $60 a barrel, and OPEC is now saying that it won't increase production over the near term. This means that prices will be staying high well into 2006.

So, you've got to have some oil and gas picks in your portfolio, plain and simple. I mentioned Pioneer Drilling Co. (AMEX/PDC) before in this column as a great way to cash in on the burgeoning oil and gas services market.

Now, as straight producers go, one company stands out with an excellent track record and solid prospects ahead. XTO Energy Inc. (NYSE/XTO) is a large-cap domestic producer of oil and natural gas.

The company's properties are concentrated in Texas, New Mexico, Arkansas, Oklahoma, Kansas, Wyoming, Colorado, Alaska, Utah, and Louisiana. As of December 31, 2004, the company's estimated proved reserves were 4.71 trillion cubic feet of natural gas, 38.5 million barrels of natural gas liquids, and 152.5 million barrels of oil.

In its latest quarter, XTO's revenues grew an amazing 90% to a record $964.2 million. Earnings for the quarter grew even more, rising 122% to a record $312.8 million, or $0.86 per share.

XTO is investing large amounts of capital in finding and extracting new energy reserves from its existing properties, and it is engaged in purchasing new properties.

From my perspective, a balanced portfolio has to have one or two pure play oil and gas producers in 2006. The oil story isn't over, it's only halfway through its cycle.

Commodity/resource stocks will provide the best returns in 2006 because this commodity price cycle has many years to go. If you don't have an oil and gas producer in your portfolio right now, you might want to consider one of two of these stocks in the not-too- distant future.