Easy Money Investing

What do you do if you have $50 billion in net worth and almost all of it is tied up in a tech, formerly high-growth company? Let’s say that company was Microsoft (MSFT) , and you were Bill Gates. How would you diversify?

Cascade Investment is a private equity firm owned by Gates, his investment vehicle outside of Microsoft. (You can see Cascade’s complete list of holdings on Stockpickr by http://stockpickr.com/port/Cascade-Investments/.) Whenever he sells shares of Microsoft and he’s not sending that money immediately to charity, it probably finds its way to Cascade, where he diversifies into stocks as far from Microsoft as can be imagined.

At Cascade, you can clearly see the influence of Warren Buffett. (http://stockpickr.com/port/Warren-Buffett/ to see Warren Buffett’s Stockpickr page and his top and recently changed holdings.) Their portfolios don’t overlap much — although both own Berkshire Hathaway (BRKA) stock, where Gates is a director — but they do have a few qualities in common:

- A focused portfolio: Cascade has $3.6 billion in investments in only 10 holdings; Buffett has long been a proponent of maintaining focus, as there are only so many companies an investor can really study at a time.

- Very consistent earnings and growth.

- Boring businesses.

- Sometimes, good brands.

For instance, about as far away from Microsoft as you can get is garbage collector Republic Services (RSG) . No one really talks about it, but the fact remains that there is more trash generated each year than the year before, and that’s probably best exemplified by the consistent chart of Republic Services’ stock price over the past five years:

Republic Services (RSG)

Even at these highs, the company still seems cheap. It has $854 million in EBITDA (earnings before interest, taxes, depreciation and amortization) and $7 billion in enterprise value (market cap minus net cash). So the company has a multiple over cash flows of just 8.5, which puts it in takeover territory.

Another interesting stock in Gates’ portfolio is Fisher Communications (FSCI) , which owns a number of television and radio stations. Of the 12,000 portfolios entered into Stockpickr, none of the nonprofessionals have selected this stock and only two professionals have: Gates and Barington Capital.

I visited the folks at Barington a little over a year ago, and their comment to me then — and I don’t know if this has changed since — is that they haven’t had a down investment since 2001.

They are activists, and invest in situations that they feel are deeply undervalued. They are also long-term holders and have been up every year since inception. That includes 2002, when the market was down 22% and Barington was up 12.75%. In 2006, Barington was up 19.11%. Here are some of http://stockpickr.com/port/Barington-Capital/ on its Stockpickr page.

The remainder of Gates’ portfolio includes solid and growing utility companies, natural resource companies and http://stockpickr.com/symbol/FS/.

Stockpickr tip of the day: Stockpickr has blatantly “borrowed” features from every search engine and major Web site.

From Google we took the idea of the critical “I’m Feeling Lucky” button and made it part of our search feature. If you ever call me on the phone and it seems like I’m not paying attention, it’s probably because I’m addictively hitting “I’m Feeling Lucky.”

Whenever you click on that button, the Stockpickr system takes you to either a random professional portfolio or a do-it-yourself portfolio that has analysis for at least three stocks. The results are often very surprising because I usually find the do-it-yourself portfolios with analysis to be more worthwhile than most of the professional ones, particularly since many hedge fund managers have been using Stockpickr to enter their portfolios.

For instance, http://stockpickr.com/port/Keyrock-Energy-Partners/ is a good micro-cap energy-focused fund in Dallas that has been keeping its positions up-to-date on Stockpickr.

http://stockpickr.com/port/Zetta-Capital-Options-Portfolio/ keeps its do-it-yourself portfolio up-to-date with analysis as well.

TAIPEI (XFN-ASIA) - The contract prices of mainstream thin-film-transistor liquid crystal display panels meant for television sets offered by leading Asian makers for the second half of this month were mostly stable when compared to prices in the first half of the month, according to the results of a survey by WitsView Technology Corp.

The only exception was the price of 20.1-inch panels, which rose by an average of 1 pct, said WitsView, which disseminates information about the industry.

The average prices of panels for desktop monitors were mixed, with those of 17-inch models rising by 3 pct and those of 19-inch models rising by 1 pct. The prices of 19-inch wide-screen models held steady.

In contrast, prices of 20.1-inch models fell by an average of 4 pct.

Average prices for 15.4-inch and 14.1-inch wide-screen panels used for notebook computers rose by 1 pct, while those of 12.1-inch models held steady, WitsView said.

philip.wang@afxasia.com

Editor’s note: As a special feature for April, TheStreet.com offers a 20-part series on virtually everything about real estate. Today’s installment is part 11.

Homeowners with high-risk mortgages are about to get some more options to help them keep their houses. Fannie Mae (FNM) and Freddie Mac (FRE) are coming out with new products designed to make it easier to avoid foreclosure by refinancing subprime loans.

Fannie and Freddie don’t lend money; they are chartered by Congress to buy mortgages from lenders, freeing them up to make more loans. The mortgages are then repackaged into mortgage-backed securities and sold to investors.

Both housing agencies currently purchase primarily so-called conventional mortgages, which are loans to borrowers with good credit. By committing to purchase subprime loans with relatively friendly terms, they are helping make them more available to consumers, providing a potential lifeline to troubled borrowers.

Fannie is adjusting its credit requirements for some existing products aimed at subprime borrowers so that more people will qualify for this option once the changes take effect later this year. It also plans to broaden the number of lenders offering the products to 2,000 from 500.

“Our message to lenders with borrowers facing resetting [adjustable-rate mortgages] is this: ‘If your homeowner has managed his credit over the past 12 months, there’s a good chance Fannie Mae can help,’” Mudd said in testimony before the House Financial Services Committee earlier this week.

Mudd said Fannie is currently getting about 15,000 applications a month for subprime refinancing; about 80% were being approved even before recent enhancements. The housing agency estimates that about 1.5 million homeowners who face resetting ARMs and potential payment shock this year and next could be eligible for its loan options.

Freddie is developing 30-year and 40-year fixed-rate as well as adjustable-rate subprime mortgages that will be available by mid-summer. The adjustable-rate mortgages will have limited payment shock by offering longer initial, fixed-rate terms, and the interest rates will reset less often and in smaller increments that traditional subprime loans.

The company announced late Wednesday that it has committed to purchase $20 billion of the new products in order to encourage lenders to offer them.

A Fannie spokesman said the company’s purchase of subprime loans could reach tens of billions of dollars over the next couple of years.

The initiatives come as an increasing number of subprime borrowers who took out loans with initial low, “teaser” rates are finding themselves unable to make their monthly payments once the rates reset.

Regulators are encouraging mortgage lenders to bend over backwards to help troubled borrowers by restructuring their loans. Still, refinancing may be the best — and only — option for many subprime borrowers who are having trouble making payments and want to stay in their homes.

If your loan has been sold to a third party and repackaged into a mortgage-backed security, the loan is held in a trust, which may have rules dictating which remedies are available. (For a closer look at how Wall Street buys mortgages and repackages them as securities, see Booyah Breakdown: MBS 101, the first story in this series.)

As Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., explained at the congressional hearing, modifying the terms of a loan used as collateral in a mortgage-backed security can jeopardize the tax-advantage status of these structures. So even if the investors stand to lose less money by allowing a problem loan to be restructured, rather than foreclosing, tax rules make it unattractive.

In some cases, loan servicers also need to get the approval from credit ratings agency or bond insurers before modifying the terms of a mortgage being used as collateral, creating additional barriers to workouts.

Barr said about 75% of the estimated $600 billion in subprime loans originated in 2006 were funded by securitizations.

An increasing number of borrowers are also using Federal Housing Administration loans to refinance out of subprime mortgages. Assistant HUD Secretary Brian Montgomery told the House Financial Services Committee that FHA refinance loan volume was up 94% in the first five months of the agency’s fiscal year over the year-earlier period. He said it’s “safe to assume” that a significant portion of the loans being refinanced are subprime.

The number of subprime borrowers the FHA can help is currently limited because of limits on the size of loans it can insure and the requirement that borrowers make a down payment. Lawmakers are debating an overhaul of the FHA that would increase loan limits and give the agency more power to set insurance premiums commensurate with risk. Montgomery said this would allow the agency to “dive deeper into the pool of homeowners who could benefit from a refinancing of their subprime loan.”

Still, even with an FHA revamp and new products from Fannie and Freddie, a number of subprime borrowers won’t be able to refinance their way out of trouble because their loans carry prepayment penalties or because they are “upside down,” meaning they owe more money than their house is currently worth.

Coming up next: homeowner’s insurance.