Gone Fishin’ (For Bailout Stocks)
October 30, 2007 – by Richard Band
Until this summer, investors really hadn’t seen a real live run on a bank since the savings and loan crisis of the 1980s. If this were a movie, we’d all be lost at sea, frantically bailing out our lifeboats just to stay a float.
Richard Band here—and not only do I love to sail, I love bailouts. Give me a bucket and a prime takeover opportunity, and I’m all over it like Blackbeard discovering a buried treasure.
Bailouts have been very good to me over the years and have made my subscribers obscenely wealthy. They’ve been pretty good to Warren Buffett, the so-called “Oracle of Omaha.” In fact, Warren Buffett recently made his intentions quite clear: He set sail a $50 billion harpoon and a taste for a big whale named Countrywide Financial. So when rumors surfaced that Buffett might hunt down Countrywide, no one was less surprised than me.
After all, this is the guy behind the Salomon Brothers bailout in 1991. He almost bailed out Long Term Capital, too, in 1998. Even Wells Fargo was a bit dicey until Warren showed up with his aw-shucks smile and his iron handshake.
Today, I’m going to give you 5 bailout bargains to help your portfolio stay afloat until this subprime mortgage mess blows over. Let’s start with 3 that will double your money in the next year or two.
Here are 3 from my favorite fishing spot that will double your money in the next year or two, with the most of your profits piling up in the next 60 to 90 days!
My Favorite Fishin’ Hole: Bailout Banks!
If you didn’t buy Argentine banks in 1994 and 1995 like my subscribers did when the World Bank bailed them out, you missed out tripling your profits in less than three years. During the Asia crisis in 1998, I smelled a bailout coming from across the Great Wall in emerging-market bonds. My subscribers brought in a truckload. In fact, we’re still holding them today, after turning a mere $10,000 investment into more than $37,000!
The Countrywide Conundrum
Keep in mind, Countrywide is not some kind of rogue bank. Sure, it has—had, I should say—subprime loans. But it is first and foremost a BANK. Most mortgage lenders are not.
As a BANK, I have to say, Countrywide runs a pretty tight ship. That’s why I own it, and that’s why Buffett wants the sit at the helm. Yes, its subprime piece of business sprung a leak when that division was shut down, leaving 6,700 employees adrift at sea. But at its heart, Countrywide is a bank that leaves behind an impressive portfolio of AAA bonds and super-safe prime mortgages. This is a bank selling at 34% discount to the value it was assigned by Wall Street just 10 days prior. It’s a gift…but not for you and me. It’s a gift for investors like Warren Buffett.
Not One…Not Two…But Three Record Catches!
So how are there any parting gifts for independent investors hoping to get in on some of the bailout bank action? You bet. Here are three record catches investors need to reel in before its too late:
The Third-Place Prize
Now I want to say right off the bat that I am not crazy like the infamous Captain Ahab. I am fully aware of the fact that Mortgage REITS are WAY out of favor on Wall street right now thanks to the subprime mortgage woes—but that’s precisely why I am drawn to this first trust that invests in residential and commercial real estate loans. As recently as July, shares would have cost you close to $50. Then came the run on Countrywide, and any stock with mortgage exposure was tossed aside with yesterday’s garbage. Investors can pick up those very same shares today for around $34. But when the dust settles and Warren emerges as the dominant player in the $11 trillion mortgage business, this Trust could be worth two or three times what it is worth today!
The Second Runner-Up:
There’s another bank that has been brought to its knees by the subprime mortgage crisis. This is an incredible bargain for a company that makes $88 billion a year. If you are looking for a safe port in the storm, consider this big commercial bank which is now producing outstanding yields. This leader in the banking industry is producing a safe 4.7% while other banks are starting to cut their dividends and jump overboard. In calm seas, this banking leader should sell for close to $60 in less than a year.
My next subprime catch is possibly the best-managed bank in the world. This California-based bank sports a pristine triple-A rating from Moody’s on its certificates of deposit—the only U.S. bank with such a distinction. This company is also a marketing machine, and is doing a far better job than its rivals at getting customers to bring in the lion’s share of their financial business under the bank’s door. It’s no small wonder that the stock has outperformed the S&P by a sweeping margin over the past 20 years, chalking up a 21% compound annual return versus a paltry 12% for the index.
The Countrywide Financial Bailout will go down in history right alongside of Chrysler, Long Term Capital and Argentine Bailouts as “the big one that got away.” Don’t let your future profits become fishing lure. Bailouts can hand you legacy-sized profits—if you’re nimble enough to catch them…act now and you could be reeling in the profits for the rest of your life.
I uncover the names of these three bailout bargains along with two others in my brand-new report, 5 Bailout Bargains—yours absolutely free with your trial subscription to my award-winning investing service, Profitable Investing! Download it right here now! Richard Band’s recommendations for conservative investors have grown 900% since 1984! Don’t miss out! Click here to get started today!