Gimme My Money!

I'm still trying to win the $500,000 that CNBC is giving away in its stock-picking challenge by following the advice my Foolish colleague Bill Barker laid out in a 10-step strategy to win the two-month-long game.

Basically, we all agree that Bill's plan is a risky approach to investing -- highly concentrated portfolios of very small-cap stocks about to announce earnings so we can capitalize on the volatility -- so in real life, we wouldn't want to necessarily invest this way. However, to play a game giving away big bucks, it's worth a try, and I figured I'd emulate Bill's ideas as closely as I could.

Don't try this at home
As I originally noted, I screened for the smallest-cap companies permissible (market caps of $500 million or more) whose stocks were trading below $10 a share and showed relatively high levels of short interest. Bill suggested delving into biotechs because they often showed the greatest price fluctuations, but I opted to find companies where they lay.

So how am I doing? Well, although most of my portfolios have apparently done better percentage-wise, I'm still no threat to the leaders just yet. My five virtual portfolios now have an average return of 3.2%, ranging from a loss of 9.7% to a gain of 10.7%. So even my worst portfolios have done better over the past week. This week, I'll look at Portfolio No. 1, with a return of 8.5% (slightly lower than the stock returns in the chart below because it includes some cash holdings).

Stock	Purchase Price	Price on May 30	% Change
Anthracite Capital (NYSE: AHR)	$7.90	$9.37	18.61%
IAMGOLD (NYSE: IAG)	$6.08	$5.91	(2.80%)
VeraSun Energy (NYSE: VSE)	$6.40	$6.80	6.25%
Heckmann (NYSE: HEK)	$7.44	$8.61	15.73%
Average Return			9.45%

While I'm still not sure just how many players there are, that average return -- while not the worst -- puts me at No. 68,581 on the list. The portfolio's value of $1,085,021.53 still puts me well behind the top player, James Fox, whose portfolio is valued at $1.7 million.

A housing hosing
The strategy of small caps about to announce earnings worked well with Anthracite Capital, a commercial finance real estate investment trust (REIT). Operating in an industry that was down and out -- it acquires pools of loans in the form of commercial mortgage-backed securities (CMBS), issues secured debt backed by CMBS, and provides mezzanine loans -- it surprised Wall Street when its reported profits doubled for the latest quarter and handily beat analyst estimates.

While real estate is slumping, the commercial sector that Anthracite operates in hasn't been hurt nearly as badly as the residential market. Yet it still gets lumped in with residential, and like iStar Financial (NYSE: SFI), which has also been beaten down on slower growth, Anthracite ultimately surpasses expectations and enjoys the resultant bounce.

A lead balloon?
Motley Fool CAPS investor JTHokie also believed Anthracite was protected from the slide in housing stocks:

Fat dividend and focus on international and commercial real estate should provide margin of safety from American residential real estate nosedive.

Movin' on up
A lot can happen in a week. Next time, we'll see which of my portfolios has made the biggest move and which may yet bring me closer to the lead.

Previous portfolio updates:

• The 10-step plan
• We hatch our plot
• Week 2 review