Back when I was growing up as a Hoosier in Indiana, I frequently played this basketball game called “Around the World.” Basically, you shoot 3-pointers as you work your way around the 3-point line. I wanted to use this concept to illustrate how easy it is to build a portfolio of undervalued companies if you’re looking hard enough. I frequently get asked questions like, “What’s the best dividend stock?,” “How do you protect yourself against a double dip?,” “How do you invest outside the USA?”
The corner shot. Prospect Capital Corporation (PSEC) is a company that I’ve come to own because they acquired Patriot Capital, a company that I owned. I figure if they are smart enough to acquire Patriot Capital, I might as well take a look at Prospect. I did. It really doesn’t take a genius to figure out that this is a steal. I’m not that smart, but I can sit on a 15% dividend, a P/E less than 10, and growth that you have to see for yourself. Take a look (below). Nothin’ but net.
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Working towards the middle. I’m a convert. I believe that peak-oil will cause oil analysts to “re-evaluate” their price forecasts where supply determines price more than demand. Longwei Petroleum (LPIH.OB) may feel like a 3-point shot but to me it feels like a layup. Uplisting to the AMEX is imminent as all the requirements are met. 2011’s $0.71 EPS isn’t bad for a stock less than $3 that is growing rapidly and helps insulate you from the high prices of peak-oil that I think will become more visible around early 2012. Swish.
The middle shot. China Armco Metals (CNAM) is not a company that you can price using past performance. In fact, past performance is a terrible indicator of future performance in this situation. Their ability to strategically position themselves with lines of credit greater than their Market Capitalization is enviable. Most companies in this space can’t even touch this. We recently saw double digit prices and I’m confident we will see them again. Backboard ballin’.
The far edge shot. I just flew down to Miami, FL to visit DJSP Enterprises (DJSP). The decline in stock price likely came with a few big players getting out and going short. Recently the CEO of DJSP stepped in and began buying a notable portion of the float on the open market. In my opinion, the wave of foreclosures is being postponed by various government programs. Give it 180 days. There will be a lot of people scrambling to get back into foreclosure processing companies like DJSP. I’m confident that DJSP will get back to business with their merged, larger client. When a stock bottoms, it has to go up. DJSP bottomed at $5. Bounce off the ground, backboard, net!
Quick Shots. Look, I hate the idea of Gold. That said, I’d rather hold gold than any currency printed by global governments if I had to pick for the next 5 years. SPDR Gold Trust ETF (GLD) is one way to play this. If I was you, I’d take cash to a local gold boutique and buy real gold with cash --- just make sure you know what you’re doing. To me, China letting the Yuan float is really them saying, “We are tired of buying overvalued US Treasuries.” Go forth and short them with ProShares Ultrashort 20+ year Treasury ETF (TBT). Also, it’s almost a race to short the Australian Dollar. The housing bubble is in Australia, not China. Kiss’d the rim.
Disclosure: Glen Bradford and his managed entities own Prospect Capital, Longwei Petroleum, China Armco, and DJSP Enterprises.