A mortgage lender stock? In this market?

Yes, if you can tolerate high risk, and Annaly Capital Management, Inc. (NYSE: NLY) is the company to consider.
Analysts believe Annaly Mortgage has taken the steps needed to position itself in the challenging and risky residential mortgage-backed securities market, with most analysts expecting earnings growth to accelerate in 2008. The Reuters FY 2007/FY 2008 EPS consensus estimates for NLY are $1.27 to $1.96

That's not to say that mortgage sector conditions will improve universally, but the point here is that NLY is in a decent position well before attitudes toward the industry are likely to change. In that sense, NLY is a 'get ahead of the pack' play, but it's only for high-risk investors.

For the most part, Annaly has realigned its portfolio to remove credit risk and has a business model that concentrates on managing interest rate and prepayment risk.

The First Call mean rating for NLY is: Buy [12 firms]. Mean 2008 target: $18.90 [high: $20, low: $18].

Stock Analysis: Annaly Mortgage is a high-risk investment not suitable for low-risk or moderate-risk investors. Sell/Stop Loss if you to purchase shares in this company: $9.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Welcome to the 44th installment of The Wal-Mart Weekly, a column dedicated to bringing you insight, wit, facts, results, opinions and just a bit of everything else when it comes down to a very hot topic these days: Wal-Mart.

Last week, I peered into Wal-Mart Stores, Inc. (NYSE: WMT)'s stance on digital content delivery. As in, music and movie downloads from the retailer's website. Wal-Mart quietly shut down its movie download service just recently on the auspices that Hewlett-Packard Company (NYSE: HPQ)'s backend technology was no longer going to be supported.

It seemed odd that the world's largest retailer would launch a movie download service and not have some kind of guarantee of future support from its partners. But, after just a year, the movie service was shuttered.

This week, the gears will be switched a bit and I'll be looking at some of the more recent arguments on Wal-Mart's effect on local communities. There are arguments on both sides (naturally), and a recent piece from fedgazette looked at Wal-Mart's position as a community destroyer (or supporter, if you have time to look at both sides of the issue).

Uncertain economic times, it goes without saying, create uphill conditions for most stocks. But that does not mean one should not search for promising opportunities, and one that fits the bill, for high-risk investors, is Biomarin Pharmaceutical.

Biomarin Pharmaceutical Inc. (Nasdaq: BMRN) develops and commercializes drugs for rare and chronic diseases.

Analysts like the fact that two of its drugs qualify for FDA orphan drug status, which grants exclusive marketing rights for seven years.

Biomarin's Aldurazyme, the sole therapy for mucopolysaccharidosis I (MPS I), obtained orphan drug status in the U.S. for seven years and in Europe for 10 years. Also, the company's Naglazyme is approved in the U.S. and Europe to treat MPS VI (Maroteaux-Lamy syndrome), another rare, genetic disease. The Reuters FY 2007/FY 2008 EPS consensus estimates for BMRN are -$0.15 to $0.49.

Given the market's continued choppy / consolidating pattern (or perhaps worse), its makes sense to add a defensive stock or two, and one worth an evaluation is Agrium Inc. (NYSE: AGU).

Agrium is the No. 1 producer and seller of fertilizers for North America, including nitrogen, as well potash and phosphate products.

The company has an 8-million-ton nutrient production capacity, but production is only half the equation: AGU also has more than 400 retail outlets in the U.S. and South America – the back-end side of the revenue equation.

For more earnings forecasts, see Peter Cohan's Earnings expectations for 10 banks tell a mixed story.

Thomson Financial expects M&T Bank Corp. (NYSE: MTB) to earn $1.63 when it announces its fourth-quarter earnings on January 14th. That's down 13% from the same period in 2006 when it earned $1.88.

M&T Bank is a Buffalo, NY-based bank operating in five segments: Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking. In the last year, its revenues were $3.5 billion and its net income totaled $803 million. Its stock has lost 39% of its value in the last year and it trades at a P/E of 10.4.

It has a mixed track record when it comes to actual versus expected earnings. In the second quarter of 2007, it beat by 4.8% but in the third quarter it missed by 5.2%. My hunch is that it will miss again.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in M&T Bank securities.

Oil Friday closed down $1.21 to $92.50 as concern that a U.S. recession would dampen both oil and gasoline demand again weighed on the markets.

The other major energy commodities also retreated. Heating oil fell about 2 cents to $2.53, unleaded gasoline declined about 4 cents to $2.32, and natural gas fell about 7 cents to $8.20 per million BTUs.

Oil closed lower for the fourth time in five sessions amid a broad retreat in the U.S. equity markets -- sell-offs that occurred despite positive news from U.S. Federal Reserve Ben Bernanke that the Fed is ready to cut key interest rates further and the Bank of America Corporation (NYSE: BAC)'s announced buy of beleaguered mortgage lender Countrywide Financial Corporation (NYSE: CFC) for $4 billion.

For more earnings forecasts, see Peter Cohan's Earnings expectations for 10 banks tell a mixed story.

Thomson Financial expects Northern Trust (NASDAQ: NTRS) to earn $0.92 when it announces its fourth quarter earnings on January 16th. That's 19% above the same period in 2006 when it earned $0.77.

Northern Trust is a Chicago-based bank whose business units include: Corporate and Institutional Services (C&IS) and Personal Financial Services (PFS). In the last year, its revenues were $2.6 billion and its net income totaled $773 million. Its stock has risen 22% in the last year, and it trades at a P/E of 21.6.

Northern Trust regularly beats estimates. In the second quarter of 2007, Northern Trust beat forecasts by 4.6%, and in the third quarter it beat by 6.9%. My hunch is that Northern Trust will again beat expectations.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Northern Trust securities.

The Procter & Gamble Company (NYSE: PG) put volume and volatility spike suggested downside hedging. PG was recently down $2.15 to $70.32. PG is expected to report second quarter (Q2) earnings per share (EPS) on January 31. PG call option volume of 26,878 contracts compared to put volume of 40,188 contracts. PG February option implied volatility of 31 is above its 26-week average of 20.

Macy's, Inc. (NYSE: M) volatility was elevated at 70 as shares hit a near four-year low. M was recently down $1.43 to $21.14. BMO Capital Markets said, "The stock is trading at 9.3x our revised 2008 estimate, which is below its historical range." M February option implied volatility of 70 is above its 26-week average of 46 according to Track Data, suggesting larger risk.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Pfizer (NYSE: PFE) shares are slightly cheaper now than a decade ago, even though the company's per-share profits are more than 70% higher. The stock is unloved for a reason: Pfizer, like many drug makers at the moment, is finding it difficult to develop new medicines.

The company's biggest seller, Lipitor for lowering cholesterol, faces the loss of patent protection in 2011. Two of Pfizer's past hits, Zoloft for depression and Norvasc for high blood pressure, are already losing sales to generic competitors. Last year, a promising inhaled insulin flopped in the marketplace. The year before, a drug that raises levels of so-called good cholesterol proved too risky, and research was halted.

And Pfizer isn't alone. Last year, the Food and Drug Administration approved just 16 first-of-its-kind drugs, a 20-year low.

All that said, I think the stock warrants a purchase at today's price for five reasons.

Delta Air Lines (NYSE: DAL) is said to be seriously considering a merger with either Northwest Airlines or United Airline's parent UAL Corp, people close to the matter say, The Wall Street Journal reported Friday.

According to the Journal, Delta is expected to give CEO Richard Anderson permission to pursue formal mergers talks with both Northwest and United, a source with knowledge of the matter said.

Delta shares were down 7 cents to $15.91, while Northwest (NYSE: NWS) declined 22 cents to $15.63, and United (NYSE: UAUA) fell 59 cents to $31.60 amid a broad market sell-off Friday afternoon.

Too many carriers

Many sector analysts believe the U.S. market has too many carriers, and could benefit from two or even three mergers or takeovers. American Airlines (NYSE: AMR) is the largest carrier by traffic, followed by United, Delta, Continental (NYSE: CAL) and Northwest.

The earnings of 10 banks expected to report in the next week suggest that while most banks will make money -- four will make more than last year, three will make less -- three others will be unprofitable.

Here are the top performers based on how much more they're expected to make this year than last:

• State Street Corporation +56%
• Bank of New York Mellon Corp. +19%
• Northern Trust +19%
• JPMorgan Chase & Co. +3%

Here are the three that are expected to make less money this year than last:

• M&T Bank Corporation -13%
• U.S. Bancorp -11%
• Wilmington Trust -7%

Amazon.com (NASDAQ: AMZN) and Sony BMG, a joint venture of Sony Corp. (NYSE: SNE) and Germany's Bertelsmann Media Group, announced yesterday that Amazon's new MP3 store will soon carry the label's entire catalog. This move makes Amazon.com's MP3 store the only digital store to offer consumer's Digital Rights Management-free MP3 tracks from all four major labels, with Sony BMG joining privately-held EMI Group, Warner Music Group (NYSE: WMG), and Vivendi (OTC: VIVEF)'s Universal Music Group.

Previously, Sony had announced a new promotion of album cards, which would allow listeners to download DRM-free MP3s, but it was limited to only about three dozen albums. The new agreement brings the entire catalog to Amazon.

The major point here is that Amazon's store now offers tracks that are playable on virtually any platform or device, from Microsoft (NASDAQ: MSFT)'s Zune and Apple (NASDAQ: AAPL)'s iPod to various off-brand players. In a press release given to Ellen Livshin of OutCast Communications, Amazon.com Vice President for Digital Music Bill Carr revealed this very fact: "Our Amazon MP3 customers will be able to choose from a full selection of DRM-free music downloads from all four major labels and over 33,000 independents that they can play on virtually any music-capable device." U.S. Sales head for Sony Thomas Hesse echoed these sentiments and added that the label is "excited to be working with Amazon as they continue to build new markets for digital music."

I've remarked before that the Amazon.com MP3 store would increase competition and drive the digital market forward, and with this announcement it seems that many predictions about the online music realm are being realized, albeit much earlier than expected. Many had pointed to mid-year as the time when DRM technology would disappear completely, but as we can now see, that timeline will be January, at least for one store.

The move is also a potentially devastating blow to Apple's iTunes Store, which had headed up the move away from DRM but has not great success, managing to score only the EMI catalog early last summer. Whatever the case may be, the Amazon.com move will increase the competition and hopefully begin the revitalization process the music industry needs. All they have to do is promote it and get consumers interested.

Although computer giant Hewlett-Packard Corp. (NYSE: HPQ) has had its neck in the home entertainment arena for quite some time, the world's largest tech company wants to throw its past in the bucket and really ramp up home products. This is based on what the company unveiled at this week's Consumer Electronics Show in Las Vegas. My only question is this: haven't we seen all this before?

The bridge that connects the internet to the home theater environment is so far from being a mainstream process that one would think many manufacturers would have abandoned the idea already. Microsoft (NASDAQ: MSFT) has pitched this idea for nearly a decade, and even Apple (NASDAQ: AAPL), which released the AppleTV to bridge this divide, has seen middling success at best.

What can Hewlett-Packard do to re-ignite this field -- if it even exists in consumers' minds? Microsoft's Home Server, meant to shuttle content from anywhere in the house to anywhere, is not exactly burning up the sales charts.

The niche of home entertainment, so far, does not seem compatible with the PC industry's idea of extending PC functionality to the living room flat-screen. From viewing HP's lackluster plans that don't seem solidly planted in reality, I'd guess this incompatibility will sit on the horizon for many years to come.

The rumors that sent shares of Countrywide Financial (NYSE: CFC) up more than 50% yesterday were extraordinarily vague. Almost laughably so, according to some reports. From the Washington Post coverage:

The deal, rumored for months, could come "very soon," although it could be delayed or fall apart all together, the Wall Street Journal reported on its web site, citing people familiar with the matter.

So people familiar with the matter -- whatever that means -- say that a deal could happen very soon, but it might take longer, and it might not happen it all.

It reminds me of the old joke about the weatherman saying "It might rain tomorrow." It might. It might not. But a prediction that is true no matter what happens is pretty much worthless.

UPDATE: Now Bank of America (NYSE: BAC) has agreed to acquire Countrywide for $4 billion. That's a problem for people who bought Countrywide yesterday, as it's a discount of about $500 million to the company's market cap at the close of trading yesterday. The Countrywide deal is a rare take-under, as shares are trading down more than 15% on the announcement of the deal.

How should investors have played Countrywide on the speculation of a deal? Stay away! It's all rumors and, to quote the best investment advice John Bogle ever received, "Nobody knows nothin'." Except for some people who do: There are reports of suspicious trading in Countrywide calls, indicating possible insider trading.

But that's illegal. The bottom line is this: if you did know something about what would happen with Countrywide, you are, by definition, an insider, and it's illegal for you to trade on it. If you didn't, you were just speculating.

The Securities and Exchange Commission has reportedly ended its probe of Usana Health Sciences (NASDAQ: USNA), and will not recommend any enforcement action, according (subscription required) to the Wall Street Journal.

Without question, this is a big victory for Usana, which has been the target of criticism from fraudster turned fraud fighter Barry Minkow. Minkow has accused the company of operating an illegal pyramid scheme, lying about the credentials of certain executives and directors, and illegally operating a multi-level marketing business in China while saying that the company had no distributors there on an investor conference call.

It's puzzling that the SEC has ended its investigation -- evidence presented on Minkow's Cheating in China website seems to indicate that Usana does have distributors in china, a lot of distributors in China. The pyramid scheme allegations aside, CFO Gil Fuller's denial of distributors in China seems to have been false.

In an email, Barry Minkow told BloggingStocks that "I respect the Securities and Exchange Commission and how hard they work at prosecuting and uncovering fraud for the public. I have not seen the letter in its entirety so I really cannot comment."

The SEC has decided not to act, but questions still remain. Class-action lawsuits on behalf of distributors are still pending and the allegations of a pyramid recruiting scheme may be more the jurisdiction of FTC regulators. And you also have to wonder why the company's auditor resigned last year.

This is quite a victory for Usana Health Sciences, but given that this is the same SEC that approved Enron's perversion of mark to market accounting, investors should remain skeptical.