SmartMoney Magazine: Best Bets For '07

It's nearly 2007 - and time for investors to begin repositioning their portfolios for the upcoming year. This morning-- SmartMoney Magazine took a look at where to invest during the next 12 months.

On “Squawk Box,” CNBC’s Carl Quintanilla spoke with SmartMoney Senior Writer, Russell Pearlman about the magazine’s newly released investment picks.

Russell Pearlman said the SmartMoney picks are based on a few observations. Rising interest rates have probably stopped--the U.S. economy is only growing by 2% to 3%, and there's likely an increased regulatory environment with Democrats taking control of Congress. With that in mind here are the SmartMoney's picks.

Dow - 60 per cent of sales are abroad -- and at $40 a share it's only trading at 11 times earnings

Yahoo - with a $50 billion dollar market for advertising by 2010.. who cares if they're number 2. its revenue will grow faster than the newspaper industry.

Hartford Financial - industry as a whole paid out 50 billion in Katrina and Rita -- but it gave them the ability to raise premiums...

Diageo - in good economies people drink.. in bad economies people drink more!

Goldman Sachs - Goldman is the leader of the pack in M&A abroad - if you expect M&A activity to continue which we do, Goldman is going to have a piece.