Last year the stocks mentioned in my newsletter, The Cohan Letter, were up 15%, 1% better than my benchmark, the S&P 500. But it was a humbling year, so I offer three stock picks for 2007 with a suggestion that you study them carefully.

2006 was humbling because my picks (I focus on three stocks in each monthly edition) trailed the market throughout much of the year. However, they ended up prevailing due to a late December surge in some of the top performing stocks -- e.g., Telefonos de Mexico, S.A. (ADR) (NYSE: TMX) was up 36% from $20.83 when I first mentioned it to $28.26 and Wal-Mart de Mexico (ADR) (OTC: WMMVY) rose 28% from $34.25 (I blogged about it here) to $43.85. This was due to portfolio managers' practice of window dressing -- buying stocks that have done well right at the end of the year so they can report to their shareholders that they owned the stocks.

Since 1998, when public sources began tracking my stock picks, I've been fortunate to have outperformed the S&P 500 in all but one year (in 2003, my stock picks were up 23% compared to 29% for the S&P 500). Since 1998, my stock picks have averaged a 67% annual return compared to a 6% return for the S&P 500. However, 2006 was by far the worst year for my stock picks -- the second worst was 2004 when my picks were up 20% compared to 9% for the S&P 500.

One of the key reasons for these results is limiting losses through a 2% stop loss on stocks mentioned in The Cohan Letter -- if a stock's price falls 2% below the level at which it was noted, the stock is sold. To put the importance of this rule into context, I used it to dump 61% of the 36 stocks highlighted in 2006. Without it, my stock picks would have lost money for investors.

So it is with a serious helping of humble pie that I offer these three stocks to consider for 2007: