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Before you make a single high-yield investment, you must read this.
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If you couldn’t make it to the Bay Area for the 2009 San Francisco Money Show, there’s no need to fret. We’ve brought the best trades from our OptionsZone
experts back for you. The best stocks, income plays and options trades — it’s all here!And if you did attend the show, you were probably so inundated with information that you could use a review. So, whether or not you made it to Frisco,
make sure you check out our top Money Show trades.
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Before you make a single high-yield investment, you must read this.
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Sysco Corp. (SYY)
By Nick Atkeson and Andrew Houghton
Sysco Corp. (SYY) is the global leader in food service distribution to schools, hospitals,
defense, restaurants and hotels. It has $1.09 billion of cash on the balance sheet, and during this recession, annual earnings have come down a grand
total of 4 cents per share from a high of $1.81, and are now on the rebound. On Aug. 10, SYY beat consensus earnings estimates. What’s more, the stock
only went below $22.50 for a few days during the first two weeks of March when the overall market was hitting its lows.In short, SYY is one of the highest-quality companies around, has a dominant market position, and is trading at 13 times earnings. We think SYY
is too good to pass up and recommend buying call options on the stock.Learn how to close out options trades for triple-digit profits.
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Before you make a single high-yield investment, you must read this.
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Sinovac Biotech Ltd. (SVA)
By Tobin Smith
Swine flu is not going away. It was declared a pandemic in June, and has spread around the world. According to the World Health Organization, it
could eventually affect 2 billion people. And China is ground zero for paranoia when it comes to this disease.China-based biopharmaceutical company Sinovac Biotech Ltd. (SVA) has a vaccine that passed
its first trial of 1,614 participants with flying colors. It proved effective after one shot when it was thought that two shots would be required.
Buy this stock before the next major swine flu scare hits.
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Before you make a single high-yield investment, you must read this.
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The Blackstone Group (BX)
By Bryan Perry
The Blackstone Group (BX) is one of the world’s leading investment advisory firms. It reported
Q1 2009 results that beat estimates by 3 cents, and a net income loss that was much less than Q4 2008. Following the upbeat report, BX shares spiked
to $15 before settling back down to around $13, which a good entry point.Blackstone declared a quarterly distribution of 30 cents per common share, and management assured me personally that they were confident they could
cover the $1.20 annual payout for 2009, with the possibility of a hike in 2010 if/when the economy rebounds. That $1.20 annual distribution translates
to a 9% current distribution yield. Revenues for 2010 are expected to jump by 90%, and earnings are forecast to explode by 196% during 2009, with
nine analysts looking for a composite 83 cents per share in earnings. My target for BX is $20.
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Before you make a single high-yield investment, you must read this.
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McMoRan Exploration Co. (MMR)
By Nick Atkeson and Andrew Houghton
Legendary geologist and McMoRan Exploration Co. (MMR) Co-Chairman James R. “Jim Bob” Moffett,
owns roughly 9% of MMR, and added to his position this summer when the company raised money through JPMorgan (JPM)
in June at $5.75 per share. Institutional investors have been getting long MMR through options during the past couple of months, and open interest
in the calls has more than doubled.Jim Bob has discovered the largest gold mine in the world, the second-largest copper mine in the world, the largest sulfur deposit in the world
and some of the biggest wells in the Gulf of Mexico. We have heard that Jim Bob said he thinks his biggest discovery is around the corner. We recommend
buying calls on MMR.
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Before you make a single high-yield investment, you must read this.
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United Healthcare Group (UNH)
By Tobin Smith
One of the big trends heading into the end of the year will be the resurgence of HMOs as the Obama public health care plan option implodes.
The most profitable HMO and PPO manager is United Healthcare (UNH). It has been beaten
down to a 4 times EBITDA valuation when 6-8 times has been the norm. As the big kahuna of health care plans for individuals and, more importantly,
for corporations, when the "public plan" dies an ugly death, I think UNH will rise to at least the $45-$50 level it saw in January 2008.Find out which health care stock will benefit no matter what Congress decides
about health care reform.
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Before you make a single high-yield investment, you must read this.
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Hatteras Financial (HTS)
By Bryan Perry
Agency real estate investment trusts (REITs) like Hatteras Financial (HTS) appear to be
excellent buys for many months to come, offering high-yield investors a chance to capture an incredible income stream while the current credit market
conditions persist. REITs that borrow heavily with short-term interest rates of 1% to 2% and purchase mortgage bonds yielding 4% to 6% are able to
capture a wide 3% to 4% spread between short-term borrowing costs and long-term lending rates. They are therefore able to leverage their portfolios
5-to-1 or 6-to-1, generating up to 20% in interest revenue, which they are required to pay out 90% of to shareholders.Additionally, agency REITs don’t own property like traditional REITs, and only trade in 100% government-backed mortgage bonds that are highly liquid.
Their bountiful times were born out of the destruction of the subprime market when, in September 2008, the federal takeover of Fannie and Freddie
led the U.S. Treasury to declare that all conforming Fannie and Freddie mortgages would be backed by the full faith and credit of the U.S. Treasury.
Trading around $30 with a current yield of 15.1%, HTS is a buy. My target is $35.Learn how to take the pain out of real estate investing
with REITs.
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Before you make a single high-yield investment, you must read this.
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Office Depot (ODP)
By Nick Atkeson and Andrew Houghton
On July 28, Office Depot (ODP) reported worse-than-expected revenues and earnings. The
stock plummeted more than 20% from a high of $5.43 on July 27, to a low of $4.25 on July 28. While equity investors were running for the hills, institutional
option investors were buying calls and selling puts in huge size. Roughly
45,000 ODP Jan 5 Calls (ODPAA) were bought and 45,000 ODP Jan 5 Puts (ODPMA)
were sold in these two days. With the stock well below $5, this action showed conviction.Since July 28, it is clear the option investors had it right, and the equity investors reacted in a manner that has lost them money. ODP recovered
and reached a high of $5.67 on Aug. 7. ODP has drifted down some, but the original option trades of July 27 and 28 are still in place. The guys who
got it right believe ODP is going higher. We think it’s time to jump on board by buying the ODP Jan 5 Calls (ODPAA).
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Before you make a single high-yield investment, you must read this.
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Bank of America (BAC)
By Tobin Smith
The second half of the year will see many headlines about the rush to refinance homes and to qualify for the $8,000 first-time homebuyer credit
before the federal coffer for the program runs dry. Like the Cash for Clunkers program, I am sure the Congress will be overwhelmed with the "success" of
the initiative and will extend the tax credit.Bank of America (BAC) is one winner here — this is where the Countrywide and Merrill Lynch
deals pay off. BAC has about $3 of earnings power per share in 2010, and that makes it a $30 stock by summer of 2010.
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Before you make a single high-yield investment, you must read this.
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Linn Energy LLC (LINE)
By Bryan Perry
Linn Energy LLC (LINE) is presenting a great opportunity for us to profit from long-term
rising energy prices. At the end of 2008, this independent oil and gas master limited partnership (MLP) operated 66% of its productive wells, and
the average proven reserve life of each well is approximately 21 years. In addition, the company has a superior record of more than replacing production.The most attractive aspect to the LINE story, though, is that the company hedged 100% of production for 2009-2011. By locking in prices that are
50% higher than the current price of oil and more than 100% higher for natural gas for the next three years, the company can comfortably pay out the
stated $2.52 annual distribution, equating to an 11.5% current yield. Knowing that the dividend is secure for at least the next 36 months is very
reassuring to those seeking that kind of income visibility. My target price for LINE is $30.Check out some of the best alternative energy stocks.
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