One Last Pair of Tantalizing Picks

 | Mar 24, 2013 | 4:08 PM EDT
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Note: For the three-part spec-play series that preceded this piece, please see here, here and here.

Let me close our March Madness Open House with a quick pitch and a speculative idea and a big-yield play, all in one.

First, you have now had a chance to see what we are here at Real Money and Real Money Pro. Note that we are now adding good writers on a regular basis, all professionals, all at different ends of the spectrum, and with high-quality, vetted ideas -- not just the fire hose of so many of our competitors.

When I established Real Money 14 years ago, I did it because I felt that Wall Street research had been corrupted by conflicts of interest, and that there were not enough views from all sides: fundamental, technical, geopolitical, currency-related, fixed income. I wanted one place where people could duke it all out. I know it's a drag to pay for anything on the Web, but I also questioned why I should give away my services or the services of others. The institution -- meaning The Street -- may have been slowed it, hampering its growth, but we would have gone out of business years ago without it.

We lost our way for a while, a victim of a management team that went against my wishes, but at this point that's neither here nor there. Instead, what I am proud of is that we are now back, giving good insight, offering investment and trading ideas on a regular basis. I do hope you will join us once the paywall is reinstated at the end of the weekend.

With that, let me give you my last investing ideas, one speculation and one investment, both in the same family.

The first is Annaly Capital Management (NLY), the best mortgage real estate investment trust in the business. Annaly was run by the late, legendary Mike Farrell, and he has put in place a remarkable team of people to run the books for this 11% yielder that has maintained its dividend through thick and thin.

If you believe, as I do, that interest rates are going higher, then Annaly may be among the best investments out there. Higher rates will halt the heretofore endless stream of prepayments on mortgages. That's the only risk this firm has had -- because, unlike so many other REITs, it has never taken on credit risk. Which is why it is still in business. Annaly will be able to capture the wider spreads and return a great deal of money to you.

Annaly had floated two sister companies, Crexus Investment (CX) and Chimera Investment (CIM). It is clear that the company is now reversing its course and taking them inside Annaly in order to give itself asset growth in a slow-growth world.

The Crexus deal is closing at a 109% premium to book value.

The accounting of Chimera is not current right now because of technical pricing issues that Annaly has assured us will not hurt its earnings per share, which are running between $0.07 and $0.09 per quarter. The current book value of this $3.25 stock is about $3 a share, but I think this is slightly understated because of a rise in its agency and non-agency paper.

Now, when the accounting becomes current, I believe there will be a good possibility that the company will be brought in for, say, $3.60 per share. In the interim you'll be getting a $0.09 dividend -- 11% yield -- while you are paid to wait.

I have very few 20%-return possibilities with limited downside. This -- which is also liked by my colleague Doug Kass, who writes for Real Money Pro -- is one of them.

There you have it: Four articles filled with speculations. Please go over the other three and be ready for a wild last quarter of the month!



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