The other shoe hit the fan Wednesday when Newcastle Investments (NCT), one of my up-and-down picks for the year announced the pricing for a 15 million common share stock offering -- six bucks! -- considerably lower than the 52-week high of $8.85 the stock reached last month.

NCT closed Wednesday March 23 at $6.02.

In making this move, management seeks to raise $85.6million for future investments and operations. This is the management that guided the company back from the grave. I know, since I bought in at 60 cents. But with 62 million shares outstanding, the 25% dilution is a huge move. What are they thinking?

This morning before the market opened, Newcastle Investments (NCT), one of my 2011 stock picks (see Chasing Value: 2011 Picks Dust the S&P) reported earnings that stomped all over analysts estimates. The company reported that in the fourth quarter of 2010, income applicable to common stockholders ("GAAP income") was $197 million, or $3.18 per diluted share, compared to $17 million, or $0.31 per diluted share, in the fourth quarter of 2009.

For the full year 2010, GAAP income was $657 million, or $10.96 per diluted share, compared to a loss applicable to common stockholders ("GAAP loss") of $223 million, or $4.23 per diluted share, in 2009.

On Friday I had the opportunity to present an investment strategy I developed over the past few years to a major asset manager interested in learning the intricacies. Among the questions he asked, one that comes up often, is how do I go about finding particular stocks that I think might be of value.

The answer of course is not so simple, because like any other type of discovery they come about in a variety of ways. Sometimes it begins with a story, as it did in December 2008 when I included EZCorp (EZPW) among my 2009 stock picks (and 2010 and 2011). In this case I was pondering what was going to be safe, and perhaps even in growing demand during a year of financial turmoil and high unemployment. The answer was pawn shops and cash-advance stores.

I have already gone on record this year saying that financial companies and insurance stocks are going to continue to rebound. In my previous two posts Chasing Value: 2011 Stock Picks -- 5 of 11 and Chasing Value: 2011 Stock Picks -- 6, 7, 8, 9, I included several financial institutions. Today I add an insurance company.

The industry got whacked hard for many reasons. For one, it makes a significant amount of profit by investing its float, and like every other investor, the industry lost a pile of money in the financial crisis. It was embroiled more directly than some industries, as several insurers are affiliated with banks. Finally the housing crisis meant disruption to payment streams by homeowners who were delinquent on more than their mortgages.

This is the fifth year that I am posting my stock picks for the year. There is a lot of foolishness in doing so because each year that I have made such suggestions, including 2009 when I owned all of the picks, it is assumed that I would hold all of the positions without responding to market conditions, or changes in the specific company. No adding to, or cutting a position. This is not the real world.

It is not possible for everything to remain static. For example, you might find that you hold a stock that made a great run through three quarters, beyond your wildest expectations, and decide it has passed a point where the metrics cannot support anything close to the price. Under normal circumstances you might sell it, except you cannot. By the end of the year the profit you might have realized fades away and you end up reporting on something that is not a true measure of your objective strategy. Nevertheless, once again I will stick with this approach because this seems to be how its done in every publication's annual picks. This year there are eleven.

Could a stock that you made 1,100% on still have room to run? Yes, it is possible. In particular if it had a near death experience as a penny stock for a while.

That is the case with Newcastle Investments (NCT), the CMBS lender and real estate investment company that reached a recent high of $7.10 and has settled back down, most recently hovering between $6.70 to $7.00. It closed Thursday December 23 at $6.71.

I was sent a press release today concerning World Wrestling Entertainment (NYSE: WWE). It was one that I had missed. WWE, as many may know, has a pretty high dividend yield. Problem is, in this trading environment, some high dividend yields have proven to be predictors of disaster. As an example, were you trading Newcastle Investment (NYSE: NCT) by any chance? Then you know what I mean. For many stocks, high yields are merely a ticket to Dividend-Cut City. Or how about General Electric Company (NYSE: GE)? That company didn't cut its dividend, but management indicates that there won't be a raise in the dividend this year. It's been many, many years since GE refused to raise its quarterly payout. In many sad ways, it could be considered a cut.

Yet, here's something encouraging for investors in WWE. Management at the world's most famous wrestling institution has come out swinging, eager to alleviate the fears of shaken investors in a world bloodied and bruised by the financial crisis (hey, maybe that could be a new wrestling character, Financial Crisis, and his finishing move could be the Mark-to-Market). According to the press release, WWE intends on keeping its current quarterly payout for the long term. The very high yield of 9%, as far as execs are concerned, is doable.

What are income investors to make of this? Well, in my opinion, long-term investors might do well with WWE stock. Consider that we are not dealing with a financial company. Like GE, WWE didn't say it intends to raise the payout. But WWE has increased the dividend quite a bit since it first initiated the shareholder-friendly initiative. In this environment, the ability to keep a high yield is something that could be valuable.

• Citigroup Inc. (NYSE: C) -- $18.45 down 63% from its 52 week high of $49.90; closed yesterday at $19.11, UP 3.57%
  
• Lehman Br Holdings (NYSE: LEH) -- $16.88 down 75% from its 52 week high of $67.73; closed yesterday at $16.13, down 4.44%
• Merrill Lynch (NYSE: MER) -- $26.25 down 67% from its 52 week high of $79.72; closed yesterday at $27.75, UP 5.7%.
• MBIA Inc (NYSE: MBI) -- $4.92 down 93% from its 52 week high of $68.98; closed yesterday at $16.14, UP 228%.
• E*TRADE (NASDAQ: ETFC) -- $3.06 down 84% from its 52 week high of $19.39; closed yesterday at $3.25, UP 6.2.
• East West Bancorp (NASDAQ: EWBC) -- $12.46 down 67% from its 52 week high of $20.88; closed yesterday at $13.01, UP 4.4%.
• Gramercy Capital (NYSE: GKK) -- $6.72 down 77% from its 52 week high of $29.45; closed yesterday at $6.80, UP 1.2%.
• Newcastle Investment (NYSE: NCT) -- $5.88 down 72% from its 52 week high of $20.88; closed yesterday at $6.89, UP 17.18%.
• Wachovia Corp. (NYSE: WB) -- $15.70 down 70% from its 52 week high of $53.10; closed yesterday at $16.65, UP 6%.
• Washington Mutual (NYSE: WM) -- $4.43 down 89% from its 52 week high of $39.48; closed yesterday at $4.24, down 4.29%

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of MBI, NCT & WM.

This is a highly leveraged company that is trying to ride out a turbulent real estate and financial market. It holds a wide variety of industrial, commercial and retail notes, with about 10% of the portfolio in residential notes. It has been hurt by the collapse of the commercial mortgage-backed securities market (CMBS), which does not show signs of recovery in the near term.

Negative earnings and high leverage are not inviting to most investors right now. But I think the company will survive and it is paying a very high yield and has been for quite some time.

Yesterday the Dow Jones Industrial Average was down 225, so I decided to peg the financial stocks I wrote about investing in as a pool. We are often accused of bragging on the good days and having memory loss on the bad so I wanted to be transparent and forthright on the downside.

The market is rebounding as I write so I expect the news is even better. Although, this pool of stocks beat the market so far in the short run, I hope to track this group for a year, or at least until Major League Baseball's spring training opens in 2009.

If you want to track the story with me the first post was Serious Money: 10 finance stocks as the market bounces. I remain stubbornly optimistic that this is a buying opportunity and investors will be sorry they did not have the courage to buy stocks when they were hated. The follow-up was Serious Money: Tempting fate with 10 financials

The initial prices are as of July 29, 2008.

After the market closed last night, with the Dow Jones Industrial Average rebounding from Monday's notable drop and ending the trading day at 11,397.56, up 266.48 (+2.39%), I posted Serious Money: 10 finance stocks as the market bounces. This is the follow-up post listing the full pool of speculative stocks that as a group I believe will beat the overall market in the next 12 months.

The prediction business is thankless and the speculative business is even worse; it is often painful. I usually refrain from this activity but today I play the contrarian in a Sir John Templeton (RIP) sort of way, jumping into the stock market's worst performing sector with both feet. I believe the market is at or near a bottom and this summer is the time to buy.

Looking for a break in the clouds, yesterday I started choosing ten stocks knowing that three or four may go to zero, a few more will survive with modest gains, and three or four will rise, not returning to their old glory soon but more than covering the ones that fail. The first four picks have been bleeding all over Wall Street for a year now and the blood-letting is not done yet.

Initially I was looking for stocks that had fallen at least 70%. After reviewing my figures, I have compromised and changed that to 63% so that I could include some of the major companies like Citigroup Inc. (NYSE: C) that are broadly held and have strong reader interest. Prices are as of July 29, 2008.

With the market looking just plain awful these days, and with the theory of recession becoming more and more concrete as the dour days pass, the concept of shorting equities is gaining popularity, at least from a headline point of view. Here's an article that talks about utilizing ETFs to go short. My colleague Timothy Sykes also discussed shorting in a recent piece of his own. Both of these articles bring up excellent points, and like Tim, I don't feel there is anything unpatriotic about betting against stocks, whether they are rising or falling. We're a capitalist society, and the trading spoils should go to the winners, whether the winners be long or short.

However, I urge all individual investors out there to think before they short. Don't take betting against a company or a market average lightly. The problem with shorting now is that it might be too late. The time to have purchased, say, the Proshares Ultrashort Dow 30 (AMEX: DXD) might have been a week ago. Remember that shorting is not a long-term idea, no pun intended. Going long is, so you're essentially going to become a market-timer when you invest in a short fund. There is nothing inherently wrong about trying to hedge yourself in a downward-spiraling environment, but make sure you understand that you are making a guess about the direction of stock prices. That's a tricky endeavor at best.

One thing you must avoid doing is shorting individual stocks. I think it's safer to short averages than it is to short companies. Again, if you're really sophisticated, you can do what you want, but do you have the guts to short a General Electric (NYSE: GE) or a Coca-Cola (NYSE: KO)? Or what about a Newcastle Investment (NYSE: NCT)? A Citigroup (NYSE: C)? These are all stocks that I believe may be going lower in the short-term, but they all pay dividends, which the short-seller is still responsible for. Plus, at some point, the dividend yields will signal to investors that a bottom could be in. Besides, with short-themed ETFs around, there's really no reason to literally borrow shares and sell them into the market. There's also the method of buying put options to take advantage of a downtrending equity, so you're covered by that technique, too.