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Buying What Is Cheap, Hated and in an Uptrend

That's why he recommends a recently spun-off real estate investment company called Silver Bay Realty Trust (SBY - Get Report), which closed on Friday at $21.33. Two Harbors Investments (TWO - Get Report), a hybrid mortgage REIT spun SBY off at the end of last year. The shares aren't that much higher than the $18-a-share IPO price.

The chart below takes a look at the price movement of both TWO and SBY over the past year. TWO closed last Friday at $12.25, not too far below its 52-week high of $12.55.

TWO Chart TWO data by YCharts

Sjuggerud said with the Federal Reserve's current monetary policies, which he calls "The Bernanke Asset Bubble," TWO could go higher. It pays a very generous double-digit dividend and maintains shares of SBY that it claims it will distribute later to shareholders as a sort of special bonus.

When it comes to SBY, Dr. Sjuggerud said it was managed by Two Harbors.

"SBY owns thousands of single-family homes in Florida, Arizona, California and Nevada," he said, and "80% of those homes are rented out to create an income stream for the company and eventually for shareholders." He anticipates SBY becoming a REIT which obligates it to distribute 90% of its "fund-from-operations" to unit holders.

"Silver Bay has no debt and sufficient cash to deploy to keep buying homes in areas where there's a big need for rental houses". You can learn more about SBY by visiting TWO's Web site and reading the press releases from the end of 2012.

"Cheap, hated and in an established uptrend, that's the kind of investments I'm looking for and my readers want to learn about," Sjuggerud concluded our interview.

Sometimes they're not easy to find, but his experience and my own is when you find them early on, the upside potential is outstanding.

You can learn more about Sjuggerud's work and opinions by visiting his archive of interesting and relevant articles. He certainly thinks "outside the box" and his track record is nothing short of impressive.

At the time of publication the author had a position in TWO and buy-limit orders for SCIF and SBY.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Make smarter trading decisions and provide investment ideas that could help make you richer. Bryan Ashenberg does the dirty work so you don't have to!
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SCIF $39.92 -1.20%
SBY $14.38 -1.40%
TWO $7.67 -1.40%
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FB $118.00 -0.48%


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