This Stock Is Going To The Moon! Grab Your Share Of The Profits Now!

As I’m looking at this chart, all I can think is… “I know what’s happening!”

I found a stock that’s caught the eye of investors. The stock bottomed in July of 2010 and has been shooting for the moon ever since.

This stock is up almost 103% in just 7 months.

Is it too late to get on board?

Not by a long shot. Back in 2007 this stock traded for over $10 a share… If it reached the old highs, it could double in value again! And I think we’ll get back to that level in the next few months.

But that’s not the only reason why I like this company.

The stock I’m going to introduce to you is in an industry poised to rebound…They have a unique business model generating hundreds of millions in revenue… the stock is hugely undervalued… and the stock pays a fat juicy dividend.

Do you really need more of a reason to buy?

I didn’t think so… now without further delay let me introduce my latest hot stock pick.

The company I want to introduce to you today is none other than NorthStar Realty Finance Corp (NRF). They trade on the New York Stock Exchange for about $5.18 a share.

The stock has seen a huge run in the last few months… but I’ll get to more on that in a moment. First, I want to tell you more about what this company does.

NorthStar first and foremost is a REIT.

In other words, they are a Real Estate Investment Trust (REIT). That means two things… first, they are focused entirely on the real estate industry. And second, as a REIT they are required by law to pay out a big portion of their profits to investors.

So what do they do?

It’s a bit complicated, but in a nutshell, NorthStar uses their capital… their cash… to buy real estate securities. They leverage up the investment and use cheap money to buy mortgage backed securities, rated notes, mezzanine financing, structured financing, secured financing, and other real estate debt.

These investments throw off nice streams of cash…

Best of all, the cash profits get returned to shareholders – just like you and me!

Now, you know NorthStar invests in real estate securities… but that’s not all they do.

NorthStar sets itself apart from the pack by also taking its business a slightly different direction. They offer what they call “Net Lease Properties.”

This is a very unique strategy.

The company partners with a corporate client who needs to operate in a big space.

NorthStar invests in the property and signs a net lease with the tenant. They only do this with big organizations.

It’s a great deal for both parties.

The corporate client gets a great piece of property without having to front all the cash to buy it. NorthStar grabs a nice piece of real estate and now has a solid tenant who signs a long term lease and pays all the bills. The arrangement is designed to throw off a nice stream of profits too!

Now, I know what you’re thinking… real estate!?!

The entire industry has been in the trash lately. The homebuilders are getting crushed.

Home values are down across the board. And the news is filled with horrible stories about rampant foreclosures. The commercial market isn’t any better!

Despite the horrible news, the industry isn’t going away.

Think about it. We’re always going to need a place to live and an office to work in. We’re going to need manufacturing plants, and production facilities… and distribution centers.

The heart of all these locations is real estate… and despite the recent market turmoil, now’s the time to be buying.

You buy when prices are low.

You buy when other investors are afraid.

You buy when nobody else is… and that’s when you grab the really big profits.

And that’s what NorthStar is doing. They’re holding tight to the real estate market.

They’re using this challenging time to buy up good quality securities and properties nobody else wants.

Here’s a perfect example…

Just a few months ago, NorthStar bought $28 million worth of real estate notes for only $2 million. Does that mean they just made $26 million? Of course not… but if these notes return just 20% of their original value, NorthStar (and their shareholders) will be making big money!

Clearly, the financial situation is key – so let’s take a closer look.

Now the third quarter was a bit rough…

Revenue was strong at over $126 million. Most of this was interest income from their portfolio and rent payments. However, the company did post a loss. Net loss to
common stockholders for the third quarter 2010 was $144.1 million. That’s about $1.87 per share.

However, keep in mind, $198 million was due to an unrealized loss on their investments. If you kicked just those losses out of the numbers, the company would have been profitable.

Now, before you start worrying, remember – we’ve just survived one of the most brutal economic recessions of our time. As we see the markets improve, I believe the company will see its portfolio increase in value again… not fall. And that will provide a huge driver to the stock.

Now the valuation on this company is a little ridiculous.

I feel like I’m buying the Tiffany Diamond for $5.18 at a garage sale!

Consider their book value. That’s the value of all the assets after subtracting out all of their debts. The book value is $15.78 per share! Right now you can buy the stock for a 60% discount off of book value… that’s a huge deal.

Another valuation metric I like to look at is Dividend Yield.

As a comparison, the S&P 500 dividend yield sits at around 1.78% right now. So, for every $100 invested, you get back $1.78.

With NRF it’s a little different.

NRF paid out a dividend of $0.10 last quarter (and have for the last 8 quarters). Assuming they continue paying out at that rate… it means the company is sending about $0.40 a year to shareholders.

With a stock price of just $5.18, it works out to a dividend yield of about 7.75%.

In a nutshell, for NRF to reach parity with the S&P 500 on a dividend yield basis, the stock would have to climb by over 440%!

If that’s not a nice return I don’t know what is!

Now, I’m not the only one who likes this company. While doing my research, I came across a document filed with the Securities & Exchange Commission. It’s form SC- 13G/A, filed by none other than the investment company BlackRock.

In case you didn’t know, BlackRock is one of the largest investment managers in the world.

They manage more than $3.56 trillion dollars of capital.

Here’s the takeaway… According to these filings from early February, BlackRock owns over 4 million shares of NRF in their various funds. That’s more than 6.35% of the company.

Clearly they see the huge upside potential like I do!

The stock is volatile and tends to bounce around a lot… but that’s “OK.” This is one company you want to buy now and hold for a while. Given the improving industry fundamentals, low book value, high dividend yields, and great market position… this stock could be a huge winner for us.





Chart courtesy of



If you like what you’ve read, do your own research… then Buy NRF up to $5.35 a share.


Prices as of February 14, 2011
The “Recommended Price” is as of the date and time of the recommendation (adjusted for splits and dividends), you may pay more or less. “Buy-up-to” means don’t pay more than this price for the stock. If you can get it cheaper, then great! “Hold” means hold if you own it, but don’t buy it if you don’t. “Sell” means sell. Remember to consult your investing professional before making any trade or investment. And remember all investments have some risk.

Insider’s Secret To Making Big Money In Stocks!

Have you ever wanted to make big money trading stocks?  Have you ever dreamed of swooping in and picking up a stock for only a few pennies… then watch it explode in value?  Do you dream of becoming a millionaire almost overnight?

Of course you do.

Everyone dreams about big financial gains.  That’s what keeps state lotteries running despite their horrible odds!

You can become a successful investor… and give yourself the opportunity to hit a few home runs on your stock investments.  But there’s a catch.  A problem actually.  See, most investors don’t have the time or the gumption to study the markets.

They don’t want to make the effort to uncover the ONE are of the market where you can turn a few hundred dollars into thousands… or hundreds of thousands… almost overnight.

Big gains can be had… you just need to know where to look.

After years of studying and working in the financial markets, I learned some invaluable lessons.  One of those lessons I’m going to share with you today.

Now before I share a very valuable secret with you, let me start by saying this…

Your stock broker is out to screw you.


His goals do not align with yours… they never have, and they never will.  Look, your stock broker works for a living.  He sells people things.  You are a customer… he’s not your advisor.  He (or she) may be a nice guy.  You might enjoy their company.

But at the end of the day, he only cares about you, IF you can buy something from him.

If you get that simple notion in your head, you’ll be light years ahead of all the other investors trying to find their way in the market.

So let’s get down to business…

One of the most important realizations you can make is the old way of investing on “Wall Street” is dead.  The old school way of making money is gone forever.  This is a huge secret you must learn now!

What strategy am I talking about?

“Buy and Hold”

It used to be, when you invested your money in “Wall Street” you’d buy a stock or two with the idea of holding them forever.   Hence the adage – “Buy and Hold.”  You invested for the long run.  It was easy.

If you bought the right stock your account grew in value.  The advice was simple… Keep holding for bigger gains down the road… you’re making money.

And if your investment value fell?  Advisors would say… “Well, just hold tight!  After all, you’re investing for the long haul – RIGHT!?!”

You were told, Buy and Hold was the gateway to wealth and prosperity.  Buy and Hold was the way to a safe and prosperous retirement.   Buy and Hold was the ONLY way to invest.

I’m here to destroy that kind of stagnant thinking.

Buy and hold is DEAD!

If you need proof, look no further than the Dot-Com crash of 2000.  How many people bought near the peak and are still sitting on huge losses?  How many people still own former high flying tech stocks… stocks that over a decade later are nowhere near their all-time high levels?

Want more proof?

Just look at the last decade in the stock market.





Chart courtesy of

At the start of the millennium… January 3, 2000 to be exact, the Dow was trading at 11,357.  Today, more than 10 years later, the Dow is trading around 12,200!

The returns were so bad, one group started calling this decade “The Big ZERO!”

You don’t need me to do the math.  Gains of this size are pathetic.  You’d have been better off investing in a bank CD or government bonds.  Why risk your money for returns measured in fractions of a percent? It just doesn’t make sense.  It doesn’t hold true anymore.

Buy and hold is dead as a doornail.

I realize this is blasphemy to many.  And for others, it will serve as a big wake-up call.

I’m here to tell you that investing for the long term is “OK”.  But you’re not supposed to blindly hold onto any and every investment you make.

No longer should you stand idly by as your investments fall in value.  No more watching your trades fall 20%, 30%, 40%, or MORE.  No more standing by doing nothing.  You must take action.

No more hanging on and not managing your portfolio.  The best way to cure yourself of these stagnant ways of thinking is to play a more active role in your investments.  Look at them.  Watch them.  When you have a big win, don’t be afraid to pull a little off the table.  There is nothing wrong with the idea of investing with house money!

And if a trade goes against you… get it out of your portfolio.

Never again should you buy a stock (or any investment) and hold regardless of movement, valuation, or price.

This simple lesson alone can differentiate you from the herd of sheep that blindly follow the advice of their brokers.  You don’t want to blindly hold stocks forever.  Don’t ride stock after stock into the ground and wonder where your life savings went.

Now you realize just how important it is to actively manage your own portfolio.

With that as a starting point, I want to share with you the best way to make big money in the stock market!  It’s not a secret trade or a source of insider information.  Nope.  One of the ways I like to invest… and make big money is with small cap stocks.

Specifically penny stocks.

Now before you roll your eyes at me, consider this.  The value of a small company is more likely to double than the value of a mega-capitalization market giant!

Just look at Exxon Mobile (XOM).  You know this company… everyone knows this company.  They own giant oilfields throughout the world and make their money selling petroleum products.  Right now they have a market value of around $400 billion dollars.

They’re a huge company.  And their stock trades for $80 a share.

Consider this… for their stock to simply double.  To go from $80 to $160 a share, their market value would approach $800 billion.  At $800 billion Exxon would rank number 16 on a list of countries according to GDP.

Exxon would be bigger on a GDP basis than the Netherlands, Turkey, Indonesia, and even Switzerland.

The idea of Exxon quadrupling in value is mindboggling.  They would break into the top 10 list leapfrogging countries like Canada, India, and Russia!

Imagine one company, and only one company, exceeding the GDP of these entire countries.  Is it impossible?  No.  It’s not likely to happen any time soon.

Now consider a much smaller player.

Take a look at a company called Hansen Natural Corp. (HANS).  This company wasn’t a household name back in 2000.  And it’s not really a household name today… unless you like their products.

The company produces several lines of natural sodas, fruit juices, and energy drinks.  Nothing shocking here.

Back at the start of the decade, HANS had a market cap of $40 million and the share price was a mere $0.54 split adjusted.  You could have bought a share for around the price of a soda.

Over the next decade the company grew like a weed.

Just look at their chart.





Chart courtesy of

The stock skyrocketed from just $0.54 to over $56 a share, where it stands today.  A little back of the envelope math and you can see it’s a return of more than 10,270% during the “lost decade”.  This company value jumped from a mere $40 million to over $5.0 billion today!

Just imagine if you’d have invested a small $1,000 in Hansen Natural stock.  You would now be sitting on more than 1,851 shares… worth more than $103,703!

Do you see the power of investing in penny stocks?

Just a few hundred dollars can turn into thousands when invested in the right companies!  Take a few minutes and look around.  You’ll find this isn’t the only example.  I could go on for days with example after example of big penny stock winners.

Oh!  And just so you don’t think I’m trying to steer you wrong, Exxon started trading January 3, 2000 with an adjusted stock price of $30.51… today it’s worth just over $82.  I guess turning that same $1,000 into $2,687 isn’t too bad…

Remember, if you’re looking to make big money in the stock market, you need to look where the big money has always been made…. Penny Stocks.

A Billionaire Is Buying This Stock…Should You?

Today I’m going to tell you about a stock that I really like…but I had my doubts. I didn’t want to tell you about this company. See, this stock is trading for more than $8.50 a share.

Normally I like to focus on much cheaper stocks. Many of the penny stocks I follow trade for under $5, and a bunch trade for less than $1…but this story was just too good to pass up. So I decided not to hold back.

I figured I’d let you decide.

Now, before I introduce my hot pick of the week, let’s take a second and talk about what’s been happening in the market.

Unless you’ve been roughing it in the wilderness for the last two weeks, you’ve no doubt heard about the peaceful protests in Egypt…and the violence in Libya. You’ve probably also heard about the impact these protests are having on oil prices.

Investors, traders, and oil industry veterans are afraid of the unrest and violence taking place in the Middle East. The fear is that civil unrest will spread from Egypt and Libya, to other oil producing nations like Saudi Arabia or Kuwait.

But the fear isn’t over social unrest. It’s over oil supplies being disrupted, or oil production being compromised!

For the first time in more than 2 years oil traded hands at over $100 a barrel!

As you would imagine, oil companies all around the world are seeing their stock prices jump. The threat of restricted supply signals a big opportunity for Oil & Gas explorers, developers, producers and other businesses supporting oil production.

Many investors are making money hand over fist – but one billionaire investor is laughing all the way to the bank!

Mexican investment guru Carlos Slim currently holds a huge position in a tiny US drilling company…and his shares have been skyrocketing in value.

Who is Carlos Slim and why should we follow what he does?

Carlos has managed to amass a fortune of over $50 billion dollars…And Forbes proclaimed him the richest man in the world in 2010. Carlos made his money through savvy investments and important business decisions.

He holds huge ownership stakes in a number of companies throughout Latin America, Mexico, and the United States. In addition to owning Mexico’s largest telephone company, he also owns a construction conglomerate, and has made investments in retail organizations, and newspapers.

Many investors have found success following in the footsteps of billionaires, and this idea is no exception.


So which Carlos Slim investment am I so focused on?

It’s none other than Bronco Drilling Company (BRNC).

Bronco Drilling is headquartered in Oklahoma and runs a fleet of drilling rigs. Bronco contracts with oil & natural gas exploration companies to do their drilling. The company has 25 drilling rigs and considers their fleet to be “Premium.”

Now, the company description isn’t too exciting.

However, Bronco has developed a number of capabilities not every drilling company can claim. They often drill where others can’t…they have the capability to drill to extreme depths, or even horizontally.

This type of advanced drilling is becoming more commonplace in North America. As a result, Bronco drilling teams are highly sought after. And the company can charge top dollar for their services. More on that in a moment…


The demand for oil seems to be insatiable these days, and as the Wall Street Journal recently noted, “Oil-drilling activity in the U.S. has accelerated to a pace not seen in a generation.”

According to recent research, 818 rigs are drilling in the US right now…more than double the number just a year ago!

This puts Bronco’s services in even more demand!

With oil prices continuing to climb, oil exploration becomes more profitable. That means once unrecoverable deposits become economical. And hard to reach deposits are now being targeted for drilling.

But high oil prices aren’t the only reason drilling activity is accelerating in North America.

With a changing economic landscape comes a changing global landscape. The Middle East is a tinderbox of instability. Who can forget the protests and riots of Tunisia, Egypt, and Libya?

The question of the day seems to be – “Who’s next?”

As a result, demand for safer more secure oil supplies like those in North America become highly sought after. And as demand for drilling climbs, the price Bronco can charge has only one direction to go…UP!

Now, it’s clear that with oil prices high, the demand for drilling services climbs… but what sets Bronco apart from the others?

One key aspect is the focus on refurbishing rigs. Over the last few years the company has been able to acquire and refurbish 25 drilling rigs, and a lot of ancillary equipment.

Their intimate knowledge of how the rigs operate is important.

See, the key to operating a rig is uptime. Bronco really only makes money while they’re drilling. So if a rig breaks or can’t run for some reason, it’s bad news. No surprise there!

Since it’s all about uptime for a drilling rig, repairs and maintenance become vital. Because Bronco does rig refurbishment in-house, they have the knowledge and experience to make repairs.

For example, if a part needs to be repaired, Bronco isn’t relying on a third party supplier (who may or may not be reliable). They make their repairs and maintenance in-house, reducing downtime, and operational issues.

Bronco’s secret sauce…

As I mentioned earlier, Bronco drilling teams have unique experience when it comes to drilling at extreme depths, or even doing horizontal drilling. This is a key selling feature for customers.

Often, Bronco is able to sign longer term drilling contracts with customers who need their experience. Some contracts can extend out for a year or more! This is a great steady stream of revenue for the company.

Bronco’s other ventures…

While the majority of Bronco’s business is based in the US, the company also has a 40% ownership stake in a Mexican drilling company, and a 25% stake in an international drilling company.

Given these market conditions, there couldn’t be a better time to invest in domestic oil drilling. And Bronco is positioned perfectly to benefit from the rising market.

Now, let’s take a look at the numbers…


Because oil prices have been down over the last few years, Bronco has struggled to show significant financial gains.

However, don’t let this throw you off the story.

The latest news from the company is looking very strong. In early February they announced a rig utilization rate of 96%! Remember, utilization rates are a key factor in determining how much revenue the company can generate.

The company also noted the “day rate” – or amount they can charge for operating a rig – increased to $17,529.

The numbers are significantly better than what the company witnessed in the third quarter of 2010…back then their utilization rate was only 64% and their day rate was just over $16,600.

Remember, as oil prices continue to climb, demand for drilling services will increase… and Bronco can then charge more for their services!

Right now, almost 20% of their fleet is under long term contract extending into 2012.

Now, the most recent financial data available is from the third quarter of 2010.

Revenue from drilling was a robust $34.8 million, and the company showed a loss from operations of just over $1 million – after adjusting for one time charges.

Knowing utilization rates and rig “day rates” are both up, I’d expect the company to see some serious improvement in the fourth quarter.

While the company hasn’t provided guidance, various estimates call for the company to generate just over $147 million in revenue…an 18.7% increase. Of course stronger revenue numbers lead to stronger earning estimates, with initial 2011 EPS estimates hitting $0.04 per share.

The best part is, all of these 2011 estimates are low enough for the company to blow them out of the water… and we all know upside surprises can really drive a stock higher!

Fourth quarter and year end numbers are set to be released on March 4…I’ll be watching those very closely.

So, Bronco is operating in a very exciting industry where demand is growing. The company is well managed, and looks to be turning things around financially. Their utilization rates and day rates are moving higher, and profitability is on the horizon.

It’s a great story but how does the stock look?


Bronco is selling for about $8.79 per share. We’re well off the lows set last June of $3.25.

Don’t let the recent price jump scare you…back in late 2008 when oil prices were trading well above $100 a barrel, BRNC traded over $18 per share!


Chart courtesy of

Now, as you recall, Billionaire investor Carlos Slim has a large holding in Bronco…but he’s not the only one. BlackRock recently started acquiring shares, and as of the latest reports, they own just over 2.2% of the company.

In case you didn’t know, BlackRock is a major player in institutional investments. They manage over $3.4 Trillion Dollars.

Clearly the smart money owns this stock.

Now, let me toss out one more important fact.

Bronco’s book value per share is $10.85. With a current price of $8.79, the stock is selling at a 19% discount! Value investors rejoice!

But that’s just peanuts compared to what it could trade for.

Remember when oil prices were sky-high, demand for their drilling services went through the roof. The company’s margins improved, and so did their profitability. Back in 2006 Bronco made $2.43 a share, and their EBITDA was over $129 million!

Given the importance of the oil & gas industry, Bronco’s unique position in the market, recent improvements in utilization and billing rates, and the acquisition of shares by major “smart money” investors, I see lots of value in this company.

I think BRNC could be trading over $18 a share in the next few months. And if the market really takes off, we could see gains of 127% or more!

Bronco is riding an upward trend in share price. Take advantage of this awesome opportunity while you still can!


If you like what you’ve read, do your own research…then Buy BRNC up to $9.05 a share.


Prices as of January 31, 2011
The “Recommended Price” is as of the date and time of the recommendation (adjusted for splits and dividends), you may pay more or less. “Buy-up-to” means don’t pay more than this price for the stock. If you can get it cheaper, then great! “Hold” means hold if you own it, but don’t buy it if you don’t. “Sell” means sell. Remember to consult your investing professional before making any trade or investment. And remember all investments have some risk.

Did You See Apple Stock This Week?

Unless you were hiding under a rock, you no doubt witnessed the crazy roller coaster ride that shareholders of Apple (AAPL) experienced this week.

To be honest, I’m sure some investors lost their lunch… even if they didn’t own Apple.

If you cut though all the news, there’s an important lesson to be learned here… but more on that in a minute.  What I want to do is touch on what’s transpired in just the last few days.  Then I’ll give you my thoughts on what it means for the future.

Just a week ago, there was a major news announcement in the technology world.

Verizon (VZ) one of the world’s largest cell phone carriers announced they would now be carrying the iPhone.  As you know iPhone is the wildly popular, cell phone made by Apple.

This little bundle of technology is allowing people to connect in ways never before thought of.  Apps, Apps, and more Apps seem to be the focus of the iPhone.  You can download an App… or mini program… to do almost anything.

Some apps can translate signs for you.  Others help calculate the tip at a restaurant.  Apps can help with a science class, and there’s even an App that turns the phone into a level.  Another App is a compass, and yet another is a map.  If you can think it, there’s an App for it!

And that’s part of the reason iPhones are so incredibly popular.

So clearly the partnership between Verizon and Apple is a big deal.  The announcement got a lot of press.  But what got even more press was what was missing.

The central figure behind the market leading dominance of Apple is the company’s CEO Steve Jobs.  Steve didn’t attend the Verizon iPhone launch… and immediately the rumors started.

Then over the long Martin Luther King holiday news broke.

Steve was taking a break from Apple to focus on his health.  The guy had a liver transplant just a few years ago.  He’s looked frail and weak ever since.  But he needs to dial it back for now.

The rumors picked up speed.

His cancer was back… the liver transplant didn’t take… He’s dead, or dying.  How sick he really is has become the key topic of debate.  Personally, I wish him the best and hope his health returns right away.

Immediately the investing world started prying into Steve’s most intimate details.  Some crazy people even called for his medical records to be made public.  Look, I’m all for full disclosure, but this is getting ridiculous!

Regardless of the disclosure, the news of his reduced responsibility was traumatic for the stock.

Investors did what they do best during times of uncertainty… they sold their Apple.  Just look at the chart.

Chart Courtesy of

You can see the stock plummeting as clear as day.  When it closed on January 14th, the stock was at $345.68 per share.  On January 18th, only 30 minutes into trading, you could buy shares of AAPL for a mere $326.  Almost $20 a share was shaved off the price of the stock.

Let me put that in perspective for you.  Apple stock lost OVER $18 billion in value in less than 30 minutes… you could hand $75 to every man, woman and Child in America and still have some left over!

But the drop in stock price wasn’t the scary part…  This is where the roller coaster ride does a double loop followed by a barrel roll.

After the loss of more than $18 billion in value, something strange happened.  Apple put out a press release.  With all the focus on the Steve Jobs’ medical announcement, many investors forgot Apple was releasing their quarterly financial results that day.

It was good news.

Apple blew away numbers and the stock rallied.  All of a sudden, nobody cared about Steve Job’s health problems.  And for a short time the stock had almost recovered to their previous highs.

The stock market reaction was exciting, gyrating, and nauseating all at the same time.   Now you know what I mean when I say some people lost their lunch!  Volatility like this made me want to throw up… and I don’t even own the stock.

So what’s the lesson to be learned in all of this?

It’s simple.  Wall Street is a very intense place with a very short attention span.  What might drive a stock lower… and cause some people to question the very existence of a company… could be replaced moments later by news that takes a stock through the stratosphere.

Now here’s my key takeaway.

Everyone’s still focused on the Apple news… but take a step back for a moment.  Apple’s results weren’t a fluke. The company is doing really well… and that’s a sign as clear as day that technology stocks are starting to shine!  When a market leader, like Apple, can shake off bad news and post incredible results, it’s a sign of leadership.

It’s a sign that we need to start watching technology stocks much more closely.  I know I’m going to.  And I recommend you do too!

How high could this stock go?

This week I have another one of my favorite stock picks for you.  I added this company to my portfolio a while back and it’s treated me well.  Best of all, this stock has lots of room to run.

I’ll give you the company name in a moment… but first a little background on why I like this stock so much.

We all know how aggressive the Federal Reserve has been when it comes to flooding the economy with cheap and easy money.  How can you argue the point with $600 billion in stimulus entering the market, and interest rates at 0.25%.You simply can’t!

Now I’ve been watching for companies performing well in cheap money environments… and today’s company is one I really like.

Now keep in mind, this isn’t another tirade on the falling value of the US Dollar or how inflation is going to spin out of control (though it eventually will).

The key to this company’s success is low borrowing costs.

My pick this week is a company who borrows money very cheaply and then invests for a higher return.  It’s a strategy called capturing the spread… and the profits can be fat and easy in today’s market place.

So what company am I talking about?  None other than MFA Financial (MFA).

Now I’m sure you’re wondering who MFA is and how they make their money.  And I’m glad you asked.

Think of MFA like a bank… they borrow money very cheaply and then invest the money in higher yielding investments.  Their investment of choice is mortgage backed securities.

Wait a minute, aren’t mortgage backed securities as good as MUD after the financial meltdown?  Well, yes and no.

You see, the MFA management team is smart.  They only invest in quality mortgage backed securities.  That means while other “risky” funds put their money in high risk, high yield mortgage pools, MFA stuck with the most stable and secure.

It cost them a little in earnings… but when the crisis hit they were looking good!

Now, here’s where I need to let you in on a little secret that most people don’t know.  These mortgage backed securities are special.  MFA is able to borrow against their own investments!

Banks will loan MFA money… as long as the mortgage backed securities back up the loan.

This means MFA can leverage up their investment.  Consider this… for every one dollar the company has to invest, they can borrow another 5 to 10 dollars… which they use to buy… you guessed it… more mortgage backed securities.

MFA owns almost $8 billion of the mortgage backed securities.

So by borrowing and investing, MFA is capturing even more of the spread.  So how profitable is investing for the “Spread”?  In the third quarter of 2010 the company captured a spread of 2.56%.  It doesn’t sound like much.  However, during that time, MFA was able to generate a net income of over $75 million!

Not bad…

But I haven’t even told you the best part about this investment.  MFA is set up as a REIT. So by law, they have to send shareholders their cut of the profits.  In the third quarter it worked out to a dividend of over $0.22 per share.

Now 22 cents won’t get you very far in life… but consider on an annualized basis (and with the stock around $8), MFA yields more than 11%!

Let’s see you get that kind of a return in a savings account… it’s just not going to happen.

Now, before you rush out and load the boat on this one… there are some risks.  Obviously, if the banks stop lending to MFA, or their loans get called the company could be in a pickle.

They are also at risk once interest rates start moving.  This risk doesn’t really concern me… remember good old Ben Bernanke at the Federal Reserve is working hard to keep rates low and the easy money flowing.

Besides, the MFA management team has been around for a while.  And they’ve all worked in environments where interest rates have been much, much higher.

So how high can MFA’s stock go?

That’s a million dollar question.  Just remember, a few short years ago the stock was trading for over $10 a share.  That’s a 20% return from here.

Don’t forget too, the yield at 11% is an attractive one.  Bigger companies often have dividend yields of around 2% or 3%.

Assuming the dividend payout of $0.88 per year stays the same… MFA would need to see the stock climb to $17.50 a share (more than double current levels) to see the yield fall to a more reasonable 5%

Chart courtesy of

Despite the recent run-up from $7.50 to $8, I still think this is a good area to establish a position in MFA.


If you like what you read, remember to do your own diligence.  Buy shares of MFA Financial (MFA) up to $8.75 a share.


Prices as of January 14, 2011
The “Recommended Price” is as of the date and time of the recommendation (adjusted for splits and dividends), you may pay more or less.  “Buy-up-to” means don’t pay more than this price for the stock.  If you can get it cheaper, then great!  “Hold” means hold if you own it, but don’t buy it if you don’t.  “Sell” means sell.  Remember to consult your investing professional before making any trade or investment. And remember all investments have some risk.

Don’t Fight The Fed

We’ve seen the US Federal Reserve manipulating the stock market over the past few weeks.  Actions like this have never been seen before in history.  Think back to the Great Depression.  What we’re seeing today is more aggressive than even the steps taken during our darkest hour.

The Federal Reserve is playing a game of chicken with the financial market.  They’re risking the US Dollar and our economy.  It’s all risked on a bet that they can manipulate the world’s largest economy, and make it bend to their will.

What the Fed is trying to do is just like trying to land a fighter jet on an aircraft carrier… in the middle of the ocean… blindfolded.

Why should you care?

Because knowing what the Fed is doing means the difference between losing thousands of dollars… and grabbing big profits in your retirement and trading accounts.  It’s that simple.

Now, I’ll tell you everything you need to know to profit from these “Big government” moves.  But first a little background…

The growth hormones the Fed is using is green… it’s money.  They’ve thrown open the gates of the financial treasury and dropping cash on the economy like there is no tomorrow.

You can see it in the latest news.  Just a few weeks ago they announced a new round of “stimulus.”  $600 Billion would be thrown into the markets to manipulate prices and interest rates.

The belief is low rates will encourage economic growth… but that’s not the case.  The US Dollar is being destroyed (more on that another time).

And, despite low rates, the bankers have closed up shop and gone home.  No one is loaning money. The easy money is no longer available.

You need to look no further than your local mortgage broker for proof.  It used to be most people interested in buying a home could qualify for a loan…. Now it’s just the opposite.

Most people DON’T Qualify.

It’s the same for small business loans, and personal credit.  Even credit cards, a huge source of easy money, has tied up the purse strings.

So lending’s not taking place.  Economic growth is slower than molasses in winter, and the Fed is still injecting the economy with money.

The result is INFLATION.

Small amounts of inflation are fine… and the Fed will point towards recent CPI data to show it’s under control.  But the bigger problem isn’t inflation… it’s runaway inflation.  Once it starts, it’s very difficult to stop.

Just look at Germany in the 1920’s or even Zimbabwe today.  Just a few years ago, economists were reporting Zimbabwe’s inflation rate at over 50% per month.

Hyperinflation destroys economies… and it could destroy ours!

The biggest problem is the arrogant Federal Reserve.  They think it’s easy to control inflation – with financial leverage.

I say Hogwash.

Once we see inflation hit, it will start slowly.  The Fed won’t react in time.  Inflation will then pick up steam and by the time the financial numbers show the ugly truth, it will be too late.

The cost of everything from bread to milk, meat, and gasoline will jump in value.

But your pay… your wages won’t rise as quickly.  You’ll be caught in the middle of a sticky paycheck, and rising prices.

Chart courtesy of

The result is economic devastation.

The worst investments you can own during an inflationary time are bonds.

Their returns are fixed, and inflation eats away at your earnings.  Even high yield bonds will trouble.  What’s the use of earning 8% to 10% per year on your money when inflation is eating away at it by 5% per month!

Inflation protection is all about hard assets.

Think about Gold.  Gold is a universal carrier of wealth.  A gold coin can be exchanged for goods here in the US, in China, Russia, even Europe.

As inflation hits, it pushes up the value of everything and gold is no exception.

Just look at a recent gold chart.  As central banks around the world injected easy money into the economy, the price of gold started climbing.

Gold’s not the only protection from inflation.  Other hard assets… Like oil & gas pipelines, real estate, even commodities will see values climb with inflation.

Remember this, hard asset investments are the only way to keep your head above water during inflationary times.

A Steal of a Deal…

This week, I’m going to introduce to you a stock I like so much I’ve been adding it to my portfolio for the last few years.

I started buying PRIMEDIA (PRM) when it was trading at just around $1.00 a share.

Believe it or not, it was paying a better than 30% dividend.

Since that time, I’ve recouped most of my investment in the dividend, and been able to capture some impressive capital gains too.

I’m up almost 400% on this trade already… but there’s still lots of room to run.

PRIMEDIA’s business is quite simple.  They produce some very useful magazines.  I’m sure you’ve seen them in the stores.

They publish magazines focused at the apartment rental and real estate markets.

If you’ve ever looked for a place to live then you’ve probably used one of their guides.

Now home and apartment hunters aren’t simply picking up these printed guides.  They’re also going to the web to do their research.

Online, PRIMEDIA owns some of the most popular web destinations like and to help with online searches.

The company makes its money through advertising and sales of ad space to apartment owners and other real estate professionals.

PRIMEDIA distributes almost 15 million free guides and directories a year.  And these guides show up in 28,000 different retail locations.  Needless to say it’s a pretty smart business model.

Why do PRIMEDIA’s Customers keep coming back? The answer is simple they get results.

Their products are simple and straight forward.  No confusion here.  They publish a magazine to help people find an apartment.  Their other magazine helps people find a home.  They publish the magazines and give them away free!  Who doesn’t like free stuff?  And when you pick up a magazine they’re easy to use.

So who are PRIMEDIA’s Customers?

They’re the apartment owners and real estate agents.  They always have a vacant apartment to fill… or a home to sell.  So every month they send PRIMEDIA a check to advertise their apartments and real estate.

The stream of revenue doesn’t end.  And that’s great news for PRIMEDIA.  Month after month, year after year, they deliver needed customers to apartment owners and real estate professionals.  Simple, efficient, and profitable.

How profitable is PRIMEDIA?

Let’s look at the financial numbers…

The third quarter numbers were announced a few weeks back, and it was a strong one for the company.  Total revenue reached $58.4 million, and their EBITDA was $17.1 million.  Not bad for such a small stock.

Net Income $6.9 million and the company was able to retire another $6.9 million in long term debt.

The company has $4.7 million of cash on hand and $212 million of debt.  The numbers don’t bother me much because the company is cash flow positive.

Once again, the company’s board authorized the payment of a $0.07 quarterly dividend.

The management team doesn’t give forward looking estimates, and there aren’t any research analysts who cover the company.  Despite this lack of information, I see the company continuing to hold the status-quo of generating big revenue, and solid cash flow.  The nice fat dividend is also a great bonus for shareholders.

PRIMEDIA is a stock most investors are overlooking… and you should be adding it to your portfolio right now!

There are a number of reasons I like PRIMEDIA as an investment:

Undervalued Company – PRIMEDIA currently trades at a P/E ratio of 8.3x.  This is dramatically lower than the stock market as a whole who sports a P/E of around 15x

Robust Dividend Yield – The company pays out a dividend of $0.28 per year ($0.07 per quarter).  With the stock price hovering around $4.40 the company has a yield of 6.3%.  Not bad considering the bank pays less than 1%!

Big Insider Holdings – The biggest holder of PRIMEDIA stock is Kohlberg Kravis Roberts & Co.  They hold just over 58% of the shares outstanding.  With a big holder and professional manager like KKR, the company is sure to be run properly.

Chart courtesy of

Exciting Industry Exposure – PRIMEDIA is in the apartment rental and real estate sales industries.  They are focused on the marketing side of things.  So as the real estate market recovers, this stock is sure to grow too!

Technically, the chart is a screaming buy…

I see a number of positive indicators that will help push the stock price higher in the coming months.

Here’s what I’m focusing on:

First the long term averages… the 200 day moving average is in a nice upslope, and has been throughout 2010.  It’s a long term signal that the stock is heading higher.

After dipping in mid year, the intermediate term moving averages (65-day) started to climb in late September and has been on a rally ever since.

Best of all, it crossed over the 200 day moving average to the upside in late October… yet again another positive indicator for the stock.

That brings us to the short term moving average… the 20 day.  This one looks a little crazy.  You can see it really jumped around in December.

Despite the big retracement, the stock is now trading above the 20 day moving average… it’s a good area to establish a position.


If you like what you’ve read, remember to do your own research. Buy shares of PRIMEDIA (PRM) up to $6.00 per share.


Prices as of December 31, 2010
The “Recommended Price” is as of the date and time of the recommendation (adjusted for splits and dividends), you may pay more or less.  “Buy-up-to” means don’t pay more than this price for the stock.  If you can get it cheaper, then great!  “Hold” means hold if you own it, but don’t buy it if you don’t.  “Sell” means sell.  Remember to consult your investing professional before making any trade or investment. And remember all investments have some risk.