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Trade of the Day: Gramercy Capital (GKK)

GKK trades under $5 now, but that won't be the case forever


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There’s no doubt that REITs are popular now. So why would I recommend a microcap that was nearly annihilated in the financial crisis, as opposed to a more predictable name like Annaly Capital Management (NYSE:NLY) or American Capital Agency Corp. (NASDAQ:AGNC)?

Gramercy Capital (NYSE:GKK) is one of a few beaten-up, low priced stocks that have structural reasons for making a big move higher. It punched through resistance at $3.85 last week and now should motor toward the mid-$5 area. If it hits that, it could even go up to $6 or $8.

The company has a large portfolio of real estate and real estate loans, and once paid dividends, but stopped during the financial crisis of 2007-2009. It sold its collateralized loan obligation (CMO) portfolio to a larger entity last month, and that move has set it on the path to restoring its dividend. It’s well regarded and now it’s just going to take time for investors to come back in a big way — a process that has already begun.

Recommendation: Buy to open GKK. Short-term traders can take profits around $5, or let your profits ride past that level.

InvestorPlace advisor Jon Markman operates the investment firm Markman Capital Insight. He also writes a daily swing trading newsletter, Trader’s Advantage which aims to capture profits of 15% to 40% and often as much at 100% to 200% in less than 90 days. 

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