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Monday, June 1, 2009

Top June 2009 Stock picks




1. ( WAC ) 13.50 a share 6/1 Target price 20.00 by 12/09
Hanover Capital Mortgage Holdings, Inc. is a specialty finance company whose principal business is to generate net interest income on its portfolio of mortgage loans and mortgage securities backed by mortgage loans on a leveraged basis. The Company avoids investments in sub-prime or Alt-A loans or securities collateralized by sub-prime or Alt-A loans. It leverages its purchases of mortgage securities with borrowings obtained primarily through the use of sales with agreements to repurchase the securities. The Company conducts its operations as a real estate investment trust (REIT) and has one primary subsidiary, Hanover Capital Partners 2, Ltd. (HCP-2). In April 2009, Walter Industries, Inc. announced the completion of the separation of its Financing business and the merger of that business with Hanover Capital Mortgage Holdings, Inc. to create Walter Investment Management Corp.Spun off by WLT (Walter's Energy) and merged with Hanover Capital Mortgage, is a REIT that manages a 1.8 billion dollar portfolio of Sub-prime, prime and non-conformingl (ie Moblil Homes) Mortgages ( with a delinquency rate under 6%). Insiders have recently gobbled up shares at a furious clip taking the stock price from 7 to just under 14 in less than 2 weeks. This, in spite of generous stock grants. One director, also Chairman of WLT, took down almost 2 million dollars worth of stock in three separate buys in the open market. The only revenue this company has at present is the yield from the mortgages, but with all the gov't programs, and the mortgage servicing and insurance divisions, there could be substantial earnings power hidden by all the recent machinations required to merge the companies. Not much info available since the merger was completed only a month ago, so you really need to read every SEC filing. Could be a real sleeper. Building a portfolio based on insider buys.Subprime mortgage REIT? It should yield almost 12% around $13, and the $1.8B portfolio could be a hidden value should the economy improve.They are looking to announce the DIV. by june or mid july ! when announce we will see a pop in this stock !

2. ( S ) 5.06 as hare 6/1 target price 9.00 a share by 9/09
Sprint Nextel Corporation (Sprint Nextel) is a holding company that offers a range of wireless and wireline communications products and services for individual consumers, businesses and government customers. The Company conducts its operations through two segments: Wireless and Wireline. Sprint Nextel owns wireless networks and a global long distance, Tier 1 Internet backbone. The Company offers digital wireless service to subscribers in all 50 states, Puerto Rico and the United States Virgin Islands under the Sprint brand name utilizing wireless code division multiple access (CDMA) technology. The Company offers digital wireless services under its Nextel brand name using integrated digital enhanced network (iDEN) technology.4G, Pre, improved customer service, more bang for your buck. (ie I dont get changed for pandora while other providers do, free TV, etc) Network will trump phones, and reliability will drastically increase. Those on the ground floor will profit. Sprint was priced as though it was going into oblivion. However the fundamentals manifested otherwise. Last quarter to everyone’s surprise they beat earnings estimates by 8 cents, paid down their debt by $600 million and added $800 million to their reserves, which now exceeds $4.5 billion. The company also has net cash flow of $3 billion. Their subsidiary Boost Mobile, best known for Prepaid customers had net additions of 800,000 new accounts and continues to grow at the same pace. Sprint's new management, starting in the first quarter of 2008 under the leadership of Dan Hesse, has been impressive in his actions in returning the company to profitability. He spun off the companies Wimax (4G) division into a joint venture with Clearwire, however maintaining 51% majority ownership. Clearwire also has a dream team of investors; Intel, Google, Time Warner, Comcast, Samsung and just recently Cisco. With Hesse at its helm the company has managed to cut costs through organic restructuring during these recessionary times. During his tenure the company has beaten earnings estimates four out of the last five quarters. Customer service has improved dramatically and anyone dealing with the company will ascertain that this is an unequivocal fact. All of this was done without a decent Smart phone contender, like the iPhone or Storm, however in two weeks Sprint will not only have a contender but it will have an exclusive on the best contender to date, the Palm Pre. According to the experts in the wireless world this could quite easily be the iPhone killer. Whether it is or not it will without a doubt be a major contender. It is my understanding that the Pre will also be 4G compatible, which is something ATT/iPhone will not be able to compete against, since ATT will not have a ubiquitous 4G network until 2012. Notwithstanding the aforementioned Sprint is very attractive on a valuation basis as a takeover target. With 49 million customers in the continental US a foreign telecom would do well in a Merger & Acquisition while Sprint is trading at around $15 billion. It is rumored that Telefonica, a $100 billion dollar global telecom company, is looking to do a major acquisition in the US and that Sprint is under its radar. Short of the economy going into a Depression, I expect Sprint to ensconce itself back to $9.5 a share, or $27 billion. $10 by the end of the year.
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