Bargain 'Targets' Till November 4th: U.S. Steel, 3M, Annaly Capital And Some Others

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 |  Includes: CHK, CVX, CXS, FCX, HTS, MMM, NLY, X
by: Marc Courtenay

Between today and November 4th we'll probably have another chance to pick up shares of some outstanding companies near their 52-week lows.

November 4th, 2011 is the day that the G-20 is supposed to come up with its final, ultimate, "rubber meets the road" solution on the European financial crisis.

There's sure to be plenty of drama and stock market swooning between now and then, and this could begin as early as Thursday, October 13th.

We've just experienced a remarkable 6 day rally in the major stock indices. The 5-day chart of the Dow Jones Industrial Average below says it all:

Chart forDow Jones Industrial Average (^DJI)

We gone way up very quickly, and a correction based on the unsolved monetary quagmire in the European Union wouldn't be much of a surprise.

The big "kahunas" in Europe all keep talking about the need to come up with billions of euros to solve this financial fiasco.

But if you crunch the numbers, you are really talking about upwards of a trillion euros needed to recapitalize the banking system there and mitigate the EU debt crisis.

A trillion Euros which is the equivalent of almost $1.4 trillion U.S. dollars. And for the past week none of the talking heads on CNBC or Bloomberg have been saying much about this.

When the "rest of the story" breaks, we may see some big investors reach for their smelling salts, and some big traders will probably drive the market down and up like a yo-yo.

One of my more prescient colleagues wrote to me today about a surprise factor looming that could be the next big excuse for an international stock market correction.

"Call me a party pooper if you want," he wrote," but I think France is going to balk when it comes down to the wire, particularly if the crisis spreads to Portugal, Spain, and Italy (as I believe it will in the weeks ahead)."

"Then you are talking about a lot more money ... probably more like 2 trillion euros."

If analysts like my colleague are correct, the sums are potentially so enormous that France and Germany won't be able to save their own banks.

If that happened, Europe's entire banking system would be considered financially unstable, especially if France's debt was ever downgraded.

We should remember that the European Central Bank told us earlier this year that nation's like Spain and Italy were not in financial hot water, and now we know better.

So we may see the stock market looking more like a heart-pounding roller-coaster ride in the days and weeks ahead. That's what the mega-traders like and that's what we should be ready for.

TWO APPROACHES: CAUTIOUS AND VERY CAUTIOUS

If you want to be cautious, start buying some great companies with enormous streams of revenue selling at historically low valuations.

U.S. Steel Corp (NYSE:X) for instance, selling at 6 times forward earnings and well below its book value would be a solid investment IF China, Brazil and the big emerging market nations aren't headed for a significant slowdown in growth.

In the trailing-twelve-months X has raked in revenues of $18.78 billion, which translates to revenue-per-share of $130.62.

If we get a nice "European Scare Pullback" we may be able to pick up some shares under $20 a share. On Oct.4th, just 9 days ago X hit an intra-day price of $18.85.

IF the western and emerging markets have just a little more growth than the current gloomy forecast, this stock could go to $40 riding the wave of the next market bubble.

Another superb choice if you're "cautious" would be 3M Corp. (NYSE:MMM) which traded down as low as $68.63 on October 4th. 3M makes abrasives, adhesives, filters, drug delivery systems, cleaning products, and even the granules for roofing shingles.

This broad array of products results from 3M’s long-standing philosophy that nourishes new ideas: Management is obsessed with new product development, cross-division sharing of ideas and rewarding creativity that boosts revenue.

But what makes 3M very attractive is that its share price has recently plummeted nearly 27% from the high $90s. This makes one of the world’s great technology companies attractive at 11.4 times earnings.

And when you check out the company's key financial statistics you'll see why I love this "cash cow" with its 3% dividend and its 53-year track record of consecutive dividend increases.

You might add to your "Bargain Wish List" other names such as Chesapeake Energy (NYSE:CHK), Freeport-McMoRan (NYSE:FCX) and Chevron (NYSE:CVX). These would be attractive if we get the correction I'm looking for before November 4th.

If you want to be "very cautious" wait for a few days of correction, bad news and stock market faltering, and then buy the "Great Mortgage REITS" like Annaly Capital (NYSE:NLY) and Hatteras Financial (NYSE:HTS) near their recent lows.

My goodness, these companies are virtually assured success as long as the Federal Reserve continues their current monetary policies, which we are told in no uncertain terms they will. Plus NLY and HTS pay 15 to 16% dividend yields!

If you want to learn more about Annaly, which is the "best-in-breed" of the mortgage REITs, read their commentary on their third quarter.

Annaly owns part of and guides another REIT that pumps out monster-sized dividends. Crexus Investment Corp. (NYSE:CXS) which operates as a specialty finance company in the United States.

It acquires, manages, and finances commercial mortgage loans and commercial real estate debts, commercial mortgage-backed securities, and other commercial real estate-related assets.

On October 4th it fell as low as $8.03 (making the yield-to-cost a staggering 15% at that level) and in the past 8 days traded up as high as $9.23. We may be able to pick up shares before November 4th closer to the October 4th low.

"Bargains" are created while panic and high anxiety rules the airwaves. We had a taste of that recently, and there may be a little left before we see a powerful year-end rally take many stocks up to levels that the bears today can't imagine.

Disclosure: I am long NLY, CXS, CHK, FCX, CVX.