VRTB and PMK

As I mentioned in my previous posts, I am a big fan of VRTB(Vestin Realty Mortgage II). And so far it has performed reasonably well. Although the stock price has fallen a bit from where I bought it, it has continued to pay over a 10% dividend each month. Another investment that I have recently purchased is PMK. These are senior notes that pay a 8.5% monthly interest. The insurance company that backs these notes PMACA is a reasonably safe company so these notes should be safe.

Thornburg Mortgage (TMA)

Thornburg Mortgage has been hit quite hard by the lack of the liquidity in the credit markets. As a result, they are expected to take a huge loss when they report results next week (10/17). However, what is not known is whether they will cut their .68 cent quarterly dividend and if so, by how much. If they do not cut the dividend or they cut it to above .40 cents, the stock has a potential to jump. There is good reason to believe that the dividend will not be cut too much.

1.) The fundamentals of the business not have changed drastically. They are not a subprime lender. They just got caught by lack of liquidity in the credit markets and had to liquidate their assets at a discount.

2.) Heavy insider buying.

3.) TMA has been a seller of their stock over the past years to get more liquidity. So, if they keep their dividend, their stock will go up and they will be able to sell their shares at a higher price.

A good way to play this earnings/dividend announcement is to buy 12.5 october calls for .25 cents. They offer a good risk/reward ratio.

I own these calls. I am not a owner of TMA.

Moodys (MCO)

With the current turmoil in the stock market, right now is a great time to pick up some great stocks trading at below intrinsic value. Lets talk about some stocks I have picked up in the past month… The stock that has the highest risk/reward ratio is Moodys (MCO).. Currently Moodys is in some hot water over the ratings it had provided for some sub prime lenders… This will be a temporary problem as the service that it provides is necessary… Although it’s trading at 20 times earnings, this company is a cash flow machine that also buys back a ton of its shares… And Moodys and S&P are the two dominant players in the rating agency game and it is impossible to get into this market… I bought the stock at $46, $44, and $43… it has moved up nicely recently (above $50)… but the potential for higher returns is still there..