1 Iron Ore Stock To Buy To Play A Rebound, 1 To Avoid

The iron ore market is showing signs of improvements, as prices increased to a three-month high and Brazil reported the third highest shipments ever in a month. However, as we will discuss later, the market still remains balanced and investors are looking at what actions the new leadership will take in China to boost steel demand.
We have a bullish stance on Vale S.A. (VALE). We think that this low cost producer with its long life reserves and strong balance sheet is well positioned to benefit from a rebound in iron ore prices. Vale is also offering a dividend yield of 3.4 per cent. However, the CLF Natural Resources (CLF) has operational concerns and it might cut dividend if prices do not rebound. Other than a dividend cut, raising capital and selling core assets are the other two options for CLF. We would advise investors to avoid this iron ore stock for the time being.
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Why Will Agency Mortgage REITs Get Hit The Most From QE3?

The announcement and the launch of the much-awaited third round of quantitative easing (QE3) by the U.S. Federal Reserve (Fed) has had mixed effects on the U.S. mortgage industry. Mortgage REITs are put in a difficult position as the street and investors in general welcomed Fed's new initiative to stimulate the sluggish US economy. Though we believe the interest spreads at agency mortgage REITs will be hurt, mortgage REITs that invest primarily in non-agency REITs will benefit. Mortgage REITs, which have large proportions of adjustable-rate securities in their holdings, will be least hurt by the acceleration in prepayments. Therefore, we recommend long positions in non-agency mortgage REITs. The remaining of the investment thesis aims at discussing the effects of QE3 on agency mortgage REITs (Annaly Capital (NLY) and American Capital Agency (AGNC), mortgage REITs that invest exclusively in adjustable rate securities (CMO), non-agency mortgage REITs (Newcastle Investment (NCT) and PennyMac (PMT)), and mREITs that hold a combination of agency and non-agency mortgage-backed securities MFA Financials (MFA) and Invesco Mortgage (IVR).

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AT&T: Limited Dividend Growth For This Dog Of The Dow

AT&T (T) is one of the dogs of the Dow, which is a strategy designed to pick ten stocks offering the highest dividend yields from the Dow Jones Industrial Average. Under this strategy, an investor who purchases these stocks should outperform the market benchmark on a total return basis. The telecom industry in the US is characterized by companies that boast high dividend yields. AT&T recently announced that it will increase its quarterly dividend to 45 cents per share, which roughly translates into a dividend yield of 5.4%, based on the current share price of $33.20. In the rest of the report, we will discuss the company's cash flow position and the sustainability of its high payout.

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Dividend Growth Of Newmont Mining: A Story Of Rising Costs And Declining Production

Although gold prices increased recently and a majority of the analysts interviewed by Bloomberg remain bullish on the commodity in the short term, we have a neutral rating on Newmont Mining Corporation (NEM). We believe the company has a strong base of operations but the rising costs, particularly at its APAC operations, and declining production remain as concerns for NEM.
Recent Developments in Gold:
On speculations that there will be more stimulus measures in the wake of President Obama's re-election, gold surged to a three-week high and the precious yellow metal is set to achieve its highest weekly gain since January 2012.
Gold ETFs tracked by Bloomberg surged to an all-time high of 2,596.1 metric tons, valued at $144.5 billion. This year gold prices rose by 11 per cent, and have been rising for 12 straight years, the longest upward trend in at least nine decades.
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Annaly Capital's Diversification Out Of Agency MBS

On the 12th of November 2012, Annaly Capital (NLY), one of the large cap US Agency mortgage REITs, announced the proposed acquisition of CreXus Investment (CXS) for a price of $12.5 per share. CreXus is a commercial mortgage REIT that does not only invest in agency residential mortgage backed securities but also in commercial mortgage loans and other commercial real estate debt. It also invests in commercial real estate property, commercial mortgage-backed securities and other commercial real estate-related assets.
The acquisition signifies Annaly Capital's attempts to diversify its asset base in a challenging environment where the Fed is committed to buying Agency mortgage backed securities. This has resulted in a decline in the yields for these securities. In several of our previous reports, we favored mortgage REITs with significant holdings of non-agency mortgage backed securities as opposed to agency mortgage backed securities. Annaly Capital is committed to allocating up to one fourth of its equity to assets other than agency residential mortgage backed securities. The company is also committed to restructuring its capital by buying back convertible notes worth $441 million, extending the duration of its short-term borrowings (repurchase agreements) by another 93 days to 220 days, and lowering the company's cost of capital by issuing preferred shares and convertible notes worth $1.5 billion.
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Down In Its Own Rubble; The Sorry State Of J.C. Penney

J.C. Penney (JCP) is a struggling company with blurred strategic horizons and increased loses. Strategic revamping by changing layouts has been the key strategy of J.C. Penney this year. The company has tried to develop mini stores within stores but the strategy has faced many issues because of a deviation from the core competitive advantage i.e. promotions and low pricing.
Q3 earnings have not been able to change our bearish stance that we took in our previous articles. We have been standing by our bearish stance mainly because of a partial failure that the company has faced in its restructuring efforts. The forecast of the CEO of bad financial results this year added weight to our belief. Quite interestingly, the results of the third quarter seem to agree with the forecasts.
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AK Steel: A Steel Stock To Sell Despite Price Hikes

Scrap prices have increased marginally because scrap demand has increased and mills are trying to build up inventory before the winter season. However, overall steel demand remains depressed and we believe AK Steel (AKS) is facing a double-edged sword as costs increase and demand remains depressed. We maintain our sell rating on AKS.
Since the last time we wrote on AK Steel, the steel manufacturer has announced that it will increase prices of some of its flat rolled products, (200, 300 and 400 series flat rolled stainless steel products) effective from shipments on December 30, 2012. This was AK Steel's second price increase in one week. On November 5th, AKS announced, with immediate effect, a $50 per ton increase in spot market base price for carbon flat-rolled steel products, mainly used in automobiles and appliances industries.
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