The 3 Best Stocks in this Mega-Investor’s Portfolio

Bill Ackman may not be a household name in the world of investing, but he should be. For starters, he became a billionaire through the successful management of hedge funds and by concentrating his bets into a small handful of opportunities he thinks will pay off big. This was the case with mall operator General Growth Properties (NYSE: GGP), one his most successful turnaround stories, as he turned a million investment into .1 billion, as I'll detail below.

Currently, Ackman is running Pershing Square Capital Management, a hedge fund that ended 2011 with a total market value of close to billion. Ackman has been likened to billionaire investors such as Carl Icahn and Warren Buffett. He has striking similarities to Icahn in that he is more than willing to confront underperforming companies and agitate for change. In many instances, he has been successful in making changes that benefited not only his hedge fund investors, but also the shareholders of the public companies he targets. And like Buffett, he is willing to bet big on a hand full of undervalued stocks.

Below are three notable recent moves from Ackman's portfolio during the last quarter of 2011. You will be able find the trademarks moves of Icahn and Buffett, but also moves that are becoming unique to Ackman as he continues to distinguish himself is one of the "gurus to watch" on Wall Street.

Ackman's beef with Canadian Pacific
Ackman's largest position, at 21% of his portfolio, is currently in Canadian railroad operator Canadian Pacific Railway (NYSE: CP). He significantly increased his stake of 4 million shares from the end of the third quarter and now owns 24.2 million shares. This works out to a current market value of about .8 billion and around 14% of the entire company.

Ackman has been advocating for the replacement of CEO Frederic Green and an overall shakeup at the company to improve its operating performance. He recently presented his views to the company's shareholders and stated that Canadian's costs are rising faster than the competition. He also argued that the company lags in service quality, so it isn't able to charge higher prices because customers aren't willing to pay more for inferior railroad transportation and delivery times.

Ackman, in a move reminiscent of Carl Icahn, is also pushing to replace Canadian's board of directors for his own members. We'll see the outcome of his proposals when the company holds its annual shareholder meeting in May.

Canadian Pacific does look like it's in need of improvement. Its operating margin of 32.2% has fallen for the past five years and way behind the peer group average of 38.4%. Ackman wants to install a management team that can lower costs, better serve clients and eventually grow faster.    

Improvements on the way at J.C. Penney
Ackman didn't increase his position in department store retailer J.C. Penney (NYSE: JCP) during the fourth quarter, but the company represents his second largest stake at about 17.5% of the portfolio, worth .4 billion. And while he hasn't been buying the stock recently, he installed his own management team in 2011, which is fast at work to improve the company's lagging performance.

As with Canadian Pacific, profitability at J.C. Penney has been lagging peers. So has its overall growth. In response, management has closed the catalog business and shuttered underperforming stores. The most notable move has been to appoint Ron Johnson, who spearheaded the effort to create retail stores at Apple (Nasdaq: AAPL), as the retailer's CEO. Johnson has moved aggressively to reduce discounting at Penney's and boost total profits.

The General Growth saga continues    
Back during the credit crisis, Ackman initiated a huge position in mall owner and developer General Growth Properties just as it was falling apart due to excessive debt and deteriorating performance at its malls. The move was a home run, with Ackman coming out well ahead of his initial cost of million to a stake worth over a billion dollars.

Like J.C. Penney, Ackman is now in control of much of General Growth's board of directors and has the helm in terms of determining the company's future direction. Between last year's third and fourth quarters, the stake rose in value by another 24% to .1 billion, or 14% of the portfolio.

Ackman has held tight with his position and received shares in real-estate developer Howard Hughes Corp. (NYSE: HHC), which was spun out of General Growth during its restructuring. The position is small at 7.6 million, or only 2% of the portfolio, but has some further upside. It owns quite a bit of real estate in areas including Las Vegas, near Baltimore and in a suburb of Houston.

Risks to Consider:  Currently, Canadian Railway and J.C. Penney are in the early stages of experiencing operating improvements. This means there could be further room for these stocks to run. Of course, they have already moved up sharply, because investors are confident in Ackman's ability to make improvements. In this respect, the main risk is that much of the coming operational improvements are already priced into the stocks. I don't think that's the case, but it may be worth picking these stocks up on any significant pullback for a larger margin of safety.

Action to Take –> Because Ackman actively pursues large, publicly-traded companies, individual investors can easily ride off of his coattails. In fact, they can cherry pick his best ideas for even higher upside potential. The big upward movement in shares of General Growth Properties since the credit crisis serves to indicate just how much potential upside there is for investors who track Ackman closely.

– Ryan Fuhrmann

This article originally appeared on StreetAuthority
Author: Ryan Fuhrmann
The 3 Best Stocks in this Mega-Investor's Portfolio

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A Breather And Some Time To Sort Through Some Greek Details

From Peter Tchir of TF Market Advisors

A Breather And Some Time To Sort Through Some Greek Details

Details continue to leak out, making it somewhat easier to analyze what is coming out of Europe.

It looks like the ECB and National Central Banks will get preferential treatment.  The ECB has already allegedly exchanged their bonds for new ones, though I don’t see a reduction in notional of existing bonds – which could be a fact that they haven’t settled yet.  It will be interesting to know definitively what the ECB owned.  And then the NCB’s since they were kind enough to do the swaps (whether legal or not, particularly in the case of English law bonds) on different days.

Greece did take the time to announce that the budget deficit will be 6.7% of GDP instead of the 5.4% that had been projected.  With a real GDP of €225 billion in 2010 that would have been about €3 billion, but with GDP dropping so quickly, it is less additional money needed than you might think (positive thinking).  The fact that they cobbled together this whole deal based on a base case that is unattainable and worse than anyone expected just 3 months ago shows the power of being locked into a negotiating stance.  Even Germany must feel a bit guilty that they put a puppet in charge of Greece whose sole function was to negotiate this deal and didn’t actually spend any time to see if there was a better alternative for Greece than more austerity and decreased sovereignty.  Killing with kindness.  Also on the European economic data front, European PMI was below 50 for the composite, services, and manufacturing.

The European Investment Bank said that Greece needs a Marshal Plan.   They kicked in €2 billion last year and seem prepared to kick in more this year.  That is reassuring that someone is focused on growth, and thankfully we live in a world where entities like the EIB can exist and issue as much debt as they want based on guarantees and promises, without impacting the credit of the guarantor.

Speaking of that, how much is the EFSF going to come up with for the Greek bailout?  It is hard to tell where all the money is coming from (at this stage – though I assume we will get more clarity any day), but Germany in particular just added a lot of debt.  If you want to assume that Italy is really participating, then Italy is on the hook for about 20% of the money coming from the EFSF (and I assume from the EU).  In that case Germany is only on the hook for 30% of the money.  If the money is really coming from those countries still mostly AAA (including France) then Germany is on the hook for 50% of the EFSF/EU money, and Italy is not burdened.  I’m sure Sarkozy is quietly hoping no one in France, or the rating agencies, notice just how much more debt France has committed themselves to.  He has been awfully quiet during this process.  The Dutch seem to be getting more involved, but seem to be leaning more towards the Finnish view, than the save Europe at all costs view.  The benefit of the current structure is that it is hard to pin the specific obligation of any one country, but in some real world of finance (that is no longer seems to exist), some countries just saw their debt burden rise.  Fortunately in the world of unlimited central bank liquidity it may not matter how much debt anyone takes on (until the day it does).

After months (it seems like years) of trying to avoid a CDS Credit Event, it looks like one is inevitable.  The Greek 5 year CDS is at least 70 bid which may be the highest ever.  The game plan seems to be that Greece will put in retroactive CAC laws.  The PSI will come in below 100%.  Greece will trigger the CAC clauses on the Greek bonds, and we will get 100% participation in all those bonds, and we will get a Credit Event.  The interesting part is that depending on what they manage to do with English law bonds, the only bonds outstanding (not in the hands of the central bank only bonds, and troika loans) will be the new bonds.  If they start CAC’ing each bond, it is possible that there will be no existing bonds outstanding left.  Settlement would be based on the new bond (yes, ISDA has a Sovereign Restructured Deliverable Obligation clause – Section 2.16 of the definitions).  With the amortization schedule in place (and not including any value attributable to the GDP strippable warrants), I get that the new bonds would trade at 30% of par with a yield of just over 13%.  I would be careful paying up for CDS here, because settlement will be against these new bonds, not existing bonds if every old bond is CAC’d.  And given the attitude out of Greece late yesterday, and harsh IMF demands, we may well see that. 

The ECB’s secondary market purchases have slowed to a trickle.  Without a doubt, the fact that the market is trading so well has played a role.  They haven’t needed to buy bonds.  That is good, but will they resume their buying if markets show any weakness?  With everything that is going on with their holdings of Greek debt, they may not be so eager to return to active SMP.  They have given the banks the ability to buy whatever they want (with LTRO) and maybe that will be enough?  Draghi’s responses to questions about their Greek bond holdings have lacked for any finesse.  He seems annoyed with the situation and being caught in the middle.  For the “integrity” of the ECB’s core mandate (and yes I’m laughing as I type) they may shy away from building a balance sheet of direct holdings of sovereign debt (as collateral for loans to banks, they have no problem).  I don’t think they like being caught in the middle as a direct lender, have felt like they are being ordered around by a bunch of politicians, and at this stage he can still largely blame the whole mess on Trichet in his memoirs.  I still think they will do SMP, but I think they will be a little more reluctant than in the past, and will use bank lending tools to try and calm markets, rather than direct intervention in sovereign debt markets.  Besides, that is the EFSF’s responsibility, if the EFSF still has any money left.

Some noise about this being the last LTRO?  I’m sure it won’t be the last LTRO if or when we get another round of fear, but makes sense with things so calm to start ratcheting down expectations.  We will see what the demand is for the February 29th one, and how much LTRO money is used to add assets as opposed to just managing funding risk. 

In the meantime, I’m not sure how central banks solve the deteriorating situation in Iran, and since they are the only ones who seem to be able to accomplish anything we should continue to watch developments there.  And although less exciting, probably more important, is figuring out if China can really manufacture a soft landing.  Expectations that things are under control there seem high, relative to evidence that all is not good.

Insiders are Spending a Fortune on These 2 Stocks. Should You Follow their Lead?

Every time the market swoons, the level of insider buying picks up sharply. It's the natural reflex company officers and directors have in a bid to defend their stock. Trouble is, these folks don't have the greatest track records. If the market falls further, then their stocks often perform poorly. And if the market rebounds, then their stocks simply rise in tandem with the rest of the pack.

Instead, I like to watch the actions of insiders when markets are moving sideways or are on an upswing. That's when insiders give a much clearer signal that shares hold value.

To be sure, insider buying appears to be at a lull since the market has been surging. The volume of daily and weekly filings has been fairly low in 2012. But the stocks that are seeing fresh insider buying surely deserve a close look right now. The 11 stocks in the table below have been the beneficiary of at least 0,000 of fresh buying since the start of the year.

 

Although this list almost exclusively involves officers who actually work at the company in question, I've also included Wendy's (NYSE: WEN) in this table, even though some of the biggest buying came from its major shareholders (who must register their moves with the SEC just as company officers do).The reason I bring this up is because I've recently written about the intriguing turnaround potential for this fast-food operator, and it's a bullish sign that the company's key investors are showing a 0 million vote of confidence in new CEO Emil Brolick.

I usually caution that turnarounds can be slow to take shape, because they involve upfront investments in the business that investors tend to dislike. But if Wendy's management can make tangible progress and shares continue to languish at current levels, then it will be interesting to see what shareholder Nelson Peltz will do. His investment firm, Trian Fund, already owned 23% of Wendy's at the end of 2011, and this stake has now bumped up to 27%. It's curious to note that in June 2011, Peltz announced that an unnamed third-party had approached him about taking Wendy's private. Nothing seems to have come out of that overture, perhaps because the two parties disagreed on a buyout price.

Perhaps Peltz was just blowing smoke. But it's clear that shares are sharply undervalued in relation to McDonald's (NYSE: MCD), and would post major gains if the wide spread between the two firms' operating metrics ever narrowed.

Unilife (Nasdaq: UNIS)
This company is at the opposite end of the spectrum from Wendy's. The medical device maker was listed on the Australian stock exchange back in 2002 and was cross-listed on the Nasdaq beginning in February 2010. Shares got off to a rousing start then, doubling in value on their second day of U.S. trading to almost , but it's been downhill ever since, with shares now trading below .

Unilife sells safety syringes that can be pre-filled by drug manufacturers or to hospitals that order them un-filled. These syringes' needles automatically retract after usage, eliminating the chance of unnecessary spikes for health care professionals. Getting Food and Drug Administration approval for a pre-loaded syringe is a cumbersome process, as each drug/syringe pairing needs to be approved. The company already has a licensing and supply agreement with Sanofi-Aventis (NYSE: SFY), with more expected to follow. Sanofi has spent million to help Unilife refine its technology and is expected to pay Unilife for each syringe.

The share price sell-off comes as investors grew impatient for the Sanofi relationship to start ramping up. Analysts once said Unlife would be in the midst of a major revenue upturn by now, but recent quarterly results have shown minimal revenue. This should normally tell investors to simply move on to other ideas — yet in this instance, a fresh look for upside is merited.

First, the Sanofi relationship appears stalled but not broken. Sales may only hit million to million in the current fiscal year that ends this June, but analysts expect to see sales finally start to build in fiscal 2013. The current consensus forecast of million in fiscal 2013 sales is likely a stretch. Investors would be cheered if Unilife had just million or million in sales, as this would at least imply a better sales ramp to come.

Second, CEO Alan Shortall has spent nearly million acquiring stock on the open market in the past seven weeks. He has a clear read into discussions that Unilife is holding with current and potential partners and would be foolish to pony up this kind of money if the company's 2012 prospects were dim.

Risks to Consider: Unilife is clearly a high-risk play, but investors seem to have abandoned this still-promising medical device firm. Also, when looking at the entire list above for further investment ideas, remember that insiders may know their own businesses very well, but are not always great stock pickers. So use their moves only as a basis for further research.

Action to Take –> As long as the market stays aloft, keep an eye on insider filings. In an environment where bargains are getting harder to come by, stocks bought by insiders may provide one of the few areas for further upside.

[Note: If you haven't heard about this unique opportunity, then I want to tell you about it now. StreetAuthority has staked me with 0,000 of real money to invest in my absolute best ideas. For a limited time, you'll be able to follow along with me completely free. Go here to learn more.]

– David Sterman

This article originally appeared on StreetAuthority
Author: David Sterman
Insiders are Spending a Fortune on These 2 Stocks. Should You Follow their Lead?

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A Tale Of Financial Fascism By Shakespeare

To be or not to be (in the Euro), that should be the question on the Greek people’s minds and not whether ’tis nobler to suffer the slings (fiscal occupation) and arrows (sovereignty destruction) of an outraged ‘fiscally fascist’ Troika. As Rodney Shakespeare so eloquently explains in this Russia Today interview, the projected trajectory of the debt/GDP for Greece is nonsense and are simply ‘manipulations that justify the banking occupation of Greece‘. In words that should ring true to any reader of the Bard, Rodney goes on to highlight the terrible plight that is to come to generations of Greeks citing the ‘whole thing as a fraud‘. The brave and highly inventive Greek people can succeed if they are not forced to bailout the banks and instead leave the Euro; dismissing the office of the financial fascists that will soon occupy the nation. Strong (and emotional) words describe why the IMF/EU/ECB bloc is so keen to maintain the status quo that is clearly crumbling at their feet as perhaps they would do well to remember the final words of this Hamlet soliloquy: ‘be all my sins remembered’.

 

Now is the Best Time to Short These Stocks

There's one huge risk in investing on the short side of a heavily-shorted stock. If short sellers are forced to cover their positions by buying back borrowed shares, then they unwittingly help spur a buying frenzy, pushing a stock up quickly. With the market steadily rebounding, that's precisely what's been happening, as the shorts' favorite targets are some of the biggest gainers of 2012.

Paradoxically, that makes this a great time initiate a fresh short position in these very same stocks. Short sellers already pointed the way to problematic business models, and at higher prices than when they were initially targeted, they could easily be even more overvalued now.

Short sellers are likely to retarget these names when they are done licking their bloody paws, but you have a chance to go short in these stocks before them.

Even if you don't tend to be a short seller, the short squeeze should at least compel you to take profits if you are hold these stocks in a long position. They've been pushed up by exogenous factors and are likely to fall back once the current rally peters out.

The stocks below have all risen at least 30% in just the first seven weeks of 2011…

 
Unwarranted rising confidence in BofA
The sharp rebound in Bank of America's (NYSE: BAC) stock has caught short-sellers off guard. They were right in targeting a troubled business that is still back-peddling in the wake of past misdeeds, but the shorts fell victim to generally improving sentiment toward banks. Analysts who follow the bank say the rally is overdone and shares are due to pull back.

Shares of BofA have risen from in mid-December to a recent , but analysts at Sterne Agee say shares are worth just on a fundamental basis. Their bearish take stems from a "weak profitability outlook and regulatory uncertainty given the outsized off-balance sheet liabilities."

Mexico's fortunes are rising, but don't be fooled…
Mexico-based cement maker Cemex (NYSE: CX) has staged a remarkable rebound, rising from under in September to a recent . Short-sellers have been fixated on the company's eye-popping debt load, and their short-covering has helped fuel the stock's rise. To be sure, the company's balance sheet and income statement look a bit better now than they did a few quarters ago, thanks to asset sales and a modest uptick in demand. As a result, Cemex is no longer in breach of financial covenants.

Nevertheless, Cemex still carries billion in debt and can ill afford a renewed slump in global economic activity. (The company has operations in Mexico, the United States and Europe). Now trading at more than 10 times trailing EBITDA, shares seem to have overshot the mark and look ripe for a pullback. These kinds of businesses often trade for closer to six or seven times EBITDA. [I recently wrote about the rising fortunes of the Mexican economy in light of China's challenges, and there are some stocks worth looking into if you want to profit from this trend. Go here to read my original take.]

The housing rally is overdone
I've recently been noting the strong (and likely overdone) rally in housing stocks, suggesting they are ripe for a pullback.
 
PulteGroup (NYSE: PHM) may be the ripest of all. The homebuilder, which has been a favorite of short sellers, has risen more than 100% since the market turned up four months ago. Last fall, trading at a steep discount to book value, shares may have seemed like a bargain. Now trading at 1.5 times book value, they are clearly overvalued in the context of the company's real estate holdings and other assets.

A two-faced stock indeed…
The rising market has shifted the spotlight back to fund management companies as investors start to pour money back into mutual funds. The sector's shares have been making a nice upward move, led by Janus Capital's (NYSE: JNS) nearly 40% gain this year. This outsized performance is likely attributable to short-covering because Janus is one the sector's weaker players, dogged by steady continuing outflows at several of its top mutual funds.

Merrill Lynch sees Janus' earnings dropping from .81 per share in 2011 to just .54 this year, thanks to reduced fund management fees as assets under management continue to drop. Shares have moved up from in mid-December to a recent .75, but Merrill Lynch, with an "underperform" rating, sees shares dropping back to .

Solar woes will likely continue
Lastly, you'll note an exchange-traded fund (ETF) in the table above. The Guggenheim Solar ETF (NYSE: TAN) has been heavily-shorted, but shorts had to scramble to cover after Deutsche Bank predicted last month that the solar industry has likely hit bottom. Many investors are dubious of that view, and even if the industry doesn't head into a deeper slump, the recent rally more than reflects any early-stage rebounds to come.

Risks to Consider: If the market keeps on rising, then short sellers will keep on covering their positions, so could pay to wait for clearer signs that the recent rally has lost steam.

Action to Take –> This is one of the best opportunities for short-selling in a number of months, because short sellers have unwittingly pushed these stocks above fair value. I like to look for a stock chart that starts to move sideways, because that is a clear sign that short covering is over and the risk is lowered that further short squeezes lie ahead. Any of the stocks I mention above are good candidates for this tactic.

– David Sterman

This article originally appeared on StreetAuthority
Author: David Sterman
Now is the Best Time to Short These Stocks

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Summarizing The Open Questions Surrounding The Second Greek Bailout

Think this time around finally the Greek deal is done? Think again. OpenEurope lists the “many” questions still surrounding the second Greek bailout that remain unanswered. We would add that this is hardly an exhaustive list, and believe the key question, to put it simply, is whether a CAC is a MAC? Because if the answer is yes, the deal is off.

From OpenEurope

Many questions around the second Greek bailout remain unanswered

We finally have an agreement on the second Greek bailout…in principle. It only took eight months. If you’re of the belief that a disorderly Greek default would have triggered Armageddon, the deal that was agreed (as ever ‘agreed’ is used loosely) by Euro finance ministers in the early hours of this morning is broadly good news.

Unfortunately, it is once again hopelessly optimistic and contains numerous gaps and unanswered questions which could still bring down the whole deal. This is nowhere outlined better than the damning leaked debt sustainability analysis (see here for full doc).

Below we outline a few key issues (not exhaustive by any means, there are many more) and give our take on how they could play out.

Greater losses for private sector bondholders: Reports suggest the Greek government was sent back to the negotiating table with bondholders at least four times during last night’s meeting. Nominal write downs for bond holders now top 53.5% (or around 74% net present value). The leaked Greek debt sustainability analysis (DSA) assumes a participation rate of 95%.

Open Europe take: 95%, really? We weren’t convinced the previous threshold of 90% with a lower write down would be reached and that was while potential ECB participation was still on the table. Although this target may have been agreed with the lead negotiators for the private sector, it is far from a cohesive group, diminishing the value of the agreement. It will be interesting to see how bondholders respond to the plan but we think that hold outs could well be more than 5%.

Greek ‘prior actions’: The deal includes a list of requirements which Greece must meet in the next week to get final approval for the bailout. These include: passing a supplementary budget with €3.3bn in cuts this year, cuts to minimum wage, increase labour market flexibility and reforms opening up numerous professions to greater competition.

Open Europe take: The now infamous €325m in cuts still needs to be specified. The huge adjustments to labour markets and protected professions mark a cultural shift in Greece – pushing these through will not be painless and could result in further riots.

Fundamental tensions in objectives of the programme: The DSA notes that the prospect achieving a return to competitiveness while also reducing debt is very small – the massive austerity could induce a further recession.

Open Europe take: As we have noted all along the assumption that Greece can impose massive levels of austerity and then return to growth in the next two years is a big leap and almost inherently contradictory. We’d also note that the cuts in expenditure in Greece are larger than have been attempted anywhere in recent memory (successful or failed). Likely to be substantial slippages in the austerity programme while the growth programme remains almost non-existent, essentially closing the book on Greek debt sustainability.

Further favourable treatment for the ECB: ECB and national central banks avoid taking losses on their holdings of Greek bonds but promise to redistribute ‘profits’ from these holdings so that they can be used in Greece.

Open Europe take: See our previous post for a full discussion of this issue. Markets still don’t seem too worried by suddenly being subordinated by central banks in Europe – they should be. This raises questions of the basic premise that all bonds are treated the same, based on who issued them not who holds them. As we’ve noted before, the whole concept of ‘profits’ is misleading, while any distribution would happen anyway – this is not a commitment from central banks but a further fiscal commitment by the eurozone (should really be included in total bailout funding).

Greece may not be able to return to the market even after three years: The DSA points out that any new debt issue will essentially be junior to existing debt, hampering the chances of Greece issuing new debt in 2014/2015.

Open Europe take: This point isn’t too clear but given that the eurozone, IMF and ECB will own such a larger percentage of Greek debt in 2014 any new private sector debt will be massively subordinated and at risk of taking losses if anything goes wrong with the Greek programme. Additionally after the restructuring the remaining private sector debt will be governed under English law and will have the EFSF sweetener – further subordinating any new debt issued to the market. Why would anyone want to purchase Greek debt in this situation (especially given the other concerns above)?

EFSF funding requirements: The EFSF will have to raise €70.5bn ahead of the bond swap – €30bn in sweeteners for the private sector, €5.5bn to pay off interest and €35bn to provide Greek banks with assets to use to gain liquidity from the ECB.

Open Europe take: We’ve already questioned whether raising these funds so quickly can be done and whether the approval from national parliaments will be forthcoming. Even if it is the €35bn is said to fall outside of the €130bn meaning it is expected to be returned swiftly – given the uncertainty over how long banks will need these assets (as long as Greece as declared as in selective default by the rating agencies) this may be a generous assumption.

There is also no talk of the money to recapitalise banks. This is a risky strategy given that Greek banks’ main source of capital (government bonds) will have just been wiped out significantly. The needs were previously specified at €23bn, although reports now suggest they could top €50bn. It’s not clear where this money will come from or when it will be raised. The bond restructuring will be like dancing through a minefield for Greek banks.

We’re still trawling through the responses, analysis and documents to come out of the meeting – meaning there are likely to be plenty more questions and uncertainties to come.

The one thing that is clear is that even if this bailout is ‘successful’, it will set Greece up for a decade of painful austerity and low growth leading to social unrest, while the eurozone will have to provide on-going transfers to help it keep its head above water.

Sorry to be killjoys but as Dutch Finance Minister Jan Kees de Jager put it, the deal isn’t “something to cheer about”.

17 Stocks Yielding 12% or More

Let's be honest. When you hear about a stock that yields 12% or more, your first thought should be that the company is probably a basket case that can't even turn a profit. If it's offering a yield that sounds too good to be true, it probably is.

And you'd be right most of the time. Usually, yields are this high because a company's share price is falling — signaling underlying problems in its business. A lower share price gives a higher dividend yield. This means profitable companies paying yields this high should be rare.
 
In fact, my staff and I recently ran the numbers. When we looked only at the companies that turned a profit during the past year, we found just 17 U.S. common stocks paying yields of more than 12%. Here, you can see them for yourself:

But did you know there are actually hundreds of 12%-plus yields out there from profitable companies? The difference is many investors just don't know where to find them.

That's because the majority of the world's highest yields aren't being paid by U.S. companies. My recent search found 210 additional stocks out there yielding 12% or more… all coming from international-based companies.

This means many income investors are essentially missing out on 92% of the highest yields before they even get started.

I've researched this topic for years. And the fact is, foreign companies are simply paying higher yields across the board.

Take a look at the table to the right.

You can see the difference between what we get from U.S. companies and what's available from international companies. Keep in mind I only looked at the common stocks of companies that were profitable in the past year.

As Judy Sarayan, a fund manager at mega-investment firm Eaton Vance explained, "There's a much stronger dividend culture abroad… individual investors play a larger role in those markets, and they have always demanded more dividends."

On a macro scale, the difference is striking. While the average yield for all stocks in the S&P 500 is just 2.0%, Germany's average yield is 3.6%… Brazil's average yield is 3.6%… the United Kingdom yields the same… Australia yields 4.7%… New Zealand pays 4.8%.

But where you really start to see a dramatic difference is when you look at some individual examples of higher yields abroad.

Take banks, for instance. Here at home, Bank of America (NYSE: BAC) used to pay investors .56 per share before the financial crisis. That represented a yield of more than 6.0%.

Of course, we all know what happened next. Today, BAC pays a laughable .01 (yes, one penny) each quarter.

But it's a completely different story outside the United States.

Santiago, Chile-based Corpbanca SA (NYSE: BCA) is a perfect example.

Chile's largest bank, Corpbanca offers commercial and retail banking through more than 100 offices. The bank also offers mutual fund management, insurance, and securities brokerages through a network of subsidiaries. Not only have the shares soared over the past five years, but dividends now total .66 per share each year. That gives the stock a yield of over 7.0% at recent prices, and you can buy it on the New York Stock Exchange.

It's the same thing for utilities. They are one of the best places to search for yields in the U.S. Duke Energy (NYSE: DUK) pays a yield of about 4.5%. But even that is topped by international utility stocks like Germany's E.ON AG (OTC: EONGY).

E.ON AG is the world's largest energy provider. It serves over 26 million customers and employs more than 75,000 people. Its shares pay investors .16 a year, for a yield of 10% — about twice as much income as the average utility here in the United States.

Still, most U.S. investors are simply unaware they're missing out on high yields like these.

I want to make something clear, though. I don't think you should drop everything and put every dollar you have into international high-yielders. Truth is, the size and scope of the U.S. market makes it a great place to search for income investments.

Action to Take –  > Limiting yourself to only U.S. stocks is like going to a restaurant and limiting your options to just one side of the menu. Sure you can find something you like… but wouldn't you rather see all the options?

And one more thing — not every one of the 210 stocks is available stateside, but don't worry, you can buy many of these without even leaving the U.S. markets.

I have more details — including several names and ticker symbols — in a presentation I recently put together. You can visit this link to read it now.

P.S. — Remember, you can learn more about investing in high-yielding international stocks — including several names and ticker symbols — by reading this presentation.

– Paul Tracy

This article originally appeared on StreetAuthority
Author: Paul Tracy
17 Stocks Yielding 12% or More

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BRuSSeLS: AnD NoW FoR SoMeTHiNG CoMPLeTeLY INDiFFeReNT…

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The catapults Juncker is loading
The plan to save Greece is exploding
If the core takes a hit
He’ll start launching shit
To keep the EU from imploding

The Limerick King

 

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Read This Before You Ever Buy Another Income Fund

My car was totaled last year when another driver's brakes failed. This story had two silver linings. No one was hurt. And I made money on the accident.

Before I bought that car in early 2008, I hunted around for the best deal. I spent weeks looking at used cars and checking listings on the Internet. Eventually, I bought my car from a used-car wholesaler for well below the book value. When it was totaled, the check from the insurance company was for more than what I had paid for the car — three and a half years later!

Of course, I would still rather have the car. I try to buy my cars like I buy my income securities — for the long haul. But getting both cars and securities at a discount gives you some buffer if the unexpected happens. And specifically in the case of income securities, buying at a discount price translates to securing a premium yield.

This is especially true with closed-end funds. Unlike other securities, closed-end funds don't trade at their net asset value (NAV). They can trade at a premium or a discount to the price of their underlying assets.

For example, when a fund trades at a 10% discount to its NAV, you are effectively buying a dollar's worth of assets for just 90 cents. If the portfolio's assets have an average yield of 5%, the discounted fund will have a yield of 5.6%.

Closed-end funds tend to trade in a range around their historical average premium or discount. Some funds just normally trade at a premium to their NAV. Some funds just normally trade at a discount. But once in awhile, something happens that causes an imbalance in a fund's normal price-to-NAV equilibrium — and the discount widens, creating a buying opportunity.

For instance, concerns about the slowing global economy — and specifically concerns that commodity-hungry China's economy could slow — pushed down on commodity prices in the second half of 2011. These concerns caused a drop in demand for the Nuveen Diversified Commodity Fund (AMEX: CFD). As a result, the fund's price dropped far faster than the price of its underlying assets, pushing the fund to a deep discount of more than 15% at the end of last year. This discount has since narrowed quickly — meaning anyone who bought when the discount was at its height is now sitting on a nice gain.

Of course the reverse can happen. A closed-end fund can start trading at an abnormally high premium. On Jan. 18, the Invesco Value Municipal Income Fund (NYSE: IIM) traded at a 7.4% premium to its NAV — its highest premium in 52 weeks. Soon after, the fund's price fell.

Few people make a big-ticket purchase like a car or a TV without first checking around for the best price. It may take some time to find a good deal, but generally it is worth the wait. In the specific case of closed-end income funds, it is especially true. Abnormally high discounts are rare, but they do surface. And they are generally worth the wait.

Action to Take –> To check the discount or premium of a fund, you can visit a site like CEFConnect.com and enter the ticker symbol. The site will show you the current discount or premium, and even has a handy chart so you can see how it has fluctuated in the past.

Even if you're an investor like me, one who consistently reinvests dividends and strives to hold for the long haul, finding entry points at a bargain level gives you the ability to lock in an above-normal yield. And that's a great foundation to build a position.

 
– Amy Calistri

This article originally appeared on StreetAuthority
Author: Amy Calistri
Read This Before You Ever Buy Another Income Fund

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Timeline For Greece Following Today’s FinMin Meeting

Today’s FinMin meeting in Brussels is supposed to be “the one”, as Greece’s fate is finally decided, and Belgian caterers are forced to apply to the EFSF for a bailout (or maybe China will roll them up?) as prospects for further local summits, meetings, shindigs, tete-a-tetes, teleconferences and what nots are severely curtailed. Maybe – maybe not. We will reserve judgment until the end of the day, because, as shocking as it may sound, Europe is not the best when it comes to making decisions on short notice. Or any decisions for that matter. Especially ones which leave Greece in the same predicament as before, and when the country will certainly need more bailouts down the road, because “cutting” debt down to only 129% of GDP does leave some things lacking. In the meantime, assuming everything goes according to status quo plan, here is a timeline and breakdown of events in the aftermath of today’s meeting.

Via Reuters

Euro zone finance ministers are expected to approve a second financing package for Greece on Monday, which aims at reducing Greek debt towards 120 percent of gross domestic product by 2020 from 160 percent now.

Approval of the new, 130-billion-euro (0 bln) financing package, which will come on top of a 110-billion-euro bailout granted in May 2010, will set in motion a debt restructuring that aims to halve Greece’s privately held debt.

Below are some of the critical dates and key events coming up that policymakers hope will draw a line under the more than two-year European sovereign debt crisis, which began in Greece.

Feb 20

- Euro zone finance ministers (the Eurogroup) to take a decision whether to grant Greece the second financing programme.

- This decision will open the way for euro zone countries to approve higher guarantees for the euro zone’s temporary bailout fund, the European Financial Stability Facility (EFSF), which will need to raise money on the market to finance the bailout.

- Preliminary Eurogroup discussion of whether to allow the 440-billion-euro EFSF and the 500-billion-euro permanent bailout fund, the European Stability Mechanism, to run in parallel, nearly doubling the euro zone’s bailout capabilities.

Feb 21-22

- If the Eurogroup gives its go-ahead on Monday, Greece will be able to launch a debt restructuring offer, inviting private investors to swap around 200 billion euros of Greek government bonds they hold for new ones worth around half as much.

Feb 23-24

- Finnish parliament likely to debate package in order to approve higher EFSF guarantees.

Feb 24-26

- Finance ministers and central bank governors from the world’s 20 biggest economies, meeting in Mexico, to discuss providing more funds for the International Monetary Fund. G20 countries have signalled that they will only agree to increase IMF funds if euro zone countries allow the ESM and the EFSF to run alongside to boost the euro zone’s bailout capacity.

Feb 27

- German parliament to vote on bailout package and use of the EFSF to secure new Greek bonds.

March 1-2

- EU summit, which will decide, among other things, whether to allow the ESM and EFSF to run in parallel, boosting the bailout capacity of the euro zone. Leaders may also be give their imprimatur to the second Greek package.

March 8

- The last day to sign up for Greek bond swap offer.

March 9

- Responses from investors concerning the bond swap offer are processed.

March 10-11

- The actual swapping of Greek bonds for new, longer-dated securities with a lower coupon takes place.

March 12-13

- Euro zone and EU finance ministers meet.

March 20

- Greece is due to repay 14.5 billion euros of debt. If the bond swap goes ahead, this would be covered, meaning Athens will avoid defaulting on this payment.

March 30-31

- Informal meeting of euro zone and EU finance ministers and central bank governors in Copenhagen.

April 20-22

- IMF meeting in Washington on bigger IMF resources

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