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The U.S. Government Is Offering a Safe 60% Gain in Two YearsBy
Thursday, January 26, 2012
"Fed says no rate hikes until at least late 2014," the headlines read yesterday.
That was music to my ears...
You see, in my True Wealth newsletter, we own a handful of investment recommendations that could make you 60%-plus in the next two years if the Federal Reserve artificially keeps rates low...
And now we have another year on our "free pass" from the Fed, since interest rates will remain around 0% until the end of 2014.
I recommend stocking up on companies whose business model is to capitalize on interest-rate manipulations by the Federal Reserve...
"The leader in this pack has always been Annaly Capital Management," I told you a month ago. I believe Annaly could make you 60%-plus over the next two years, as I'll explain in a minute.
In that essay, I explained why Annaly is such a great value right now...
Yesterday, that story just got better. The Fed extended its free pass another year... to the end of 2014. As a result, Annaly will be able to borrow for next-to-nothing through the end of 2014.
Annaly's business is not very exciting... It simply borrows money at 1.5% and invests it in safe, "boring" bonds. It only buys bonds that have zero credit risk because they're 100% guaranteed by the government.
It's not "sexy"... But it can make you rich...
You see, Annaly has earned investors a 636% return over the last 15 years. And much of that return has come from dividends...
From late 1997 to today, Annaly's share price is up just 34%. However, if you reinvested the dividends, you've increased your money more than sixfold.
Yesterday, the Fed extended Annaly's free pass until the end of 2014. Annaly should be able to continue to pay big dividends by borrowing at a low rate and investing that money (with no credit risk) at a higher rate.
Even better, the shares are cheap, trading near book value.
In short, I believe you could make gains of over 60% in two years on this "boring" stock. Here's how...
I expect investors will go on a desperate hunt for yield this year. I believe they will discover Annaly as a safe, double-digit yielder... and they will drive it from its current price near book value up to as much as a 35% premium to book value. That would give you a 35% gain in the share price.
Add in the 14% a year that Annaly is paying in dividends for at least the next two years, and your gain swells to over 60%.
The Fed just gave us a free pass in Annaly until 2014. Take advantage of it.
Consider buying shares of Annaly now, if you don't own them already. Take profits if the stock rises 35% – whenever it hits 1.35 times book value. Otherwise, collect your solid, double-digit dividends while you wait for others to push Annaly's share price up.
Good investing,
Steve
Further Reading:
In September, Steve showed his subscribers the power of following True Wealth Systems buy signals in Annaly. Since 1998, this system has turned every $10,000 into more than $64,000. Read more here: Safe, 500%-Plus Profits Since 1998.
Late last year, Steve wrote about an opportunity to collect double-digit dividends through Annaly's sister company. Like Annaly, this company distributes nearly all its profits to shareholders through dividends. Today, it's selling for less than book value... and paying 15% dividends.
Market NotesTHE "BIG PICTURE" VIEW OF SILVER WHEATON After spending more than a year "digesting" big gains, Silver Wheaton (SLW) is ready to head higher...
Regular readers know we consider Silver Wheaton one of the premier silver plays in the market. Silver Wheaton isn't your average mining stock. It doesn't operate mines or explore for mineral deposits. Instead, it finances lots of early-stage silver projects... and collects royalties when those projects start producing silver. This makes the company a diversified, leveraged way to profit from rising silver prices.
In 2009, with shares trading around $13, we noted how this stock was enjoying one of the strongest uptrends in the market... and could explode higher in a precious-metals bull market. About two years after our note, SLW had tripled in price. But like all big moves, this one needed time to "digest" its gains before going higher. That's just how the market works.
You can see in the two-year chart below that SLW spent 2011 "digesting" in a volatile, sideways range... which frustrated both buyers and sellers. During this sideway move, sellers twice managed to knock SLW down near $27. The stock rebounded both times. As Steve recently noted in his True Wealth newsletter, SLW has a solid fundamental picture driving this uptrend. The technical picture is firming up as well. It's time to be long SLW.
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