An anylist by the name of Scott Barbee makes a convincing case for FBR.Now,I am a bit familiar with this stock, having owned it years ago when it changed from a Investment bank into a REIT.At the time REIT[real estate investment trusts] were very popular due to the favorable tax treatment and the sucessful conversion to this format by other corporations..That was before subprime.Guess what they invest in?yup… mortgages.The stock was a disaster for me then; I sold it at $7 bought at 15$.That was years before the subprime meltdown as well!.But it has got worse..it is now trading at$1.60.To say this stock is hated is an understatement.However in many ways the stock is a poorer version of Analy mortgage.They invest in mortgage loans and work off the spread.Analy is the best of the group and it has been hurt too..but not like this!.Mr Barbee claims to have looked through the mortgage and agency bond portfolio and finds it not as horrific as it’s near bankruptcy stock price would indicate.Why would this be a possibility for the contest?..1]low stock price =much leverage.$3 is a 100% gain.2]Financial stocks have been pounded into the sand for the last 7 sessions.They bounced on Fri and were up today.A strategy that has worked is to find stocks in a sector that is out of favor,but is coming into favor,and have not participated yet. 3]limited downside=good risk reward.Don’t fall in love with this stock! shoot for a coat tail ride if the financials have a good week .Goldman Sacks and other big companies report earnings this week.Look for plays in this volatile sector this week!2008-06-16

Tags: FBR undervalued?cnbc contest

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