I’d also caution investors to remember that Tesla Motors Inc (NASDAQ:TSLA) owes $465 million in loans from the Advanced Technology Vehicle Manufacturing loan program, which requires it to pay back $12 million in just interest each quarter. Ultimately, this loan will have to be paid off by the end of the decade. In order for that to happen, Tesla Motors Inc (NASDAQ:TSLA) will have to do something it hasn’t done since it became a public company: be consistent and deliver on what it promises.
I’m simply not convinced that Tesla’s move higher is warranted given the inconsistencies in the underlying business, the lack of EV infrastructure, and its outstanding loan.
Chimera Investment Corporation (NYSE:CIM)
Not that long ago I featured Annaly Capital Management, Inc. (NYSE:NLY) as a mortgage REIT worth watching because of the Federal Reserve’s language regarding its bond-buying program. Although Fed Chairman Ben Bernanke has made no qualms about continuing to purchase mortgage-backed securities, or MBS’s, through 2013, it may lessen its bond purchases shortly thereafter.
One of the biggest detriments to mREITs like Annaly is that with the government snatching up outstanding MBS’s, the price paid and the net interest margin these mREITs received was under constant pressure. Without the Fed constantly buying MBS’s, a better supply will yield quality instead of quantity in mREITs portfolios.
Where Annaly and Chimera Investment differ is in which MBS’s they prefer to purchase. Annaly purchases only agency-backed securities (those guaranteed by the full faith of the government), while Chimera purchases a mixture of agency and non-agency loans. The upside for Annaly is that it can pile on the leverage without too much fear of reciprocity since its loans are backed by the government. On the flip side, its net interest margin is going to be much lower than that of Chimera, which will net much higher yields from its non-agency loans. Conversely, if things go bad, Chimera is on the line for its losses.
Following the roughly one-year period it took Chimera to get its reporting in order, we learned from the deep dive that fellow Fool John Maxfield took into Chimera last month that its problems aren’t operational, but based on accounting competency. While unwelcome, these problems are easy to fix, and they don’t jeopardize its business model. With lending-rate visibility clear as a whistle through 2015, Chimera’s yield and bottom line returns should improve and the stock could still be in for an amazing rally.
The article 3 Stocks to Get on Your Watchlist originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends, Johnson & Johnson and Tesla Motors.
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