Rising Star Buys: Annaly Capital and Fortune Brands

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This article is part of our Rising Star Portfolios series.

This month, I'm putting money into two stocks that I consider lower risk, given the ongoing macro challenges, and they're names that are familiar to followers of the Special Situations portfolio. So tomorrow, I'll be buying shares of Annaly Capital (NYSE: NLY  ) and Fortune Brands (NYSE: FO  ) .

As I detailed in my original buy thesis for Annaly, I see the company as a solid hedge against the continuing economic challenges in the U.S. and abroad. And the catalysts that continue to make it appear attractive:

  • A Congress trying to trim the budget deficit in a time of slack demand? Check.
  • The Fed providing some transparency on low interest rates out to 2013? Check.
  • Lowered growth forecasts for the second half of the year? Check.
  • Continued unemployment that even the optimists don't see improving for years? Check.

In short, there are many reasons to believe that Annaly will continue to be a great place to park cash for some time. So tomorrow I'll be adding another $500, or about 3%, of my initial capital into the stock.

My second buy
The next stock buy should bring us fortune, even if it's in name only. Still, I expect good things from Fortune Brands, the purveyor of distilled liquors and home improvement products. As I detailed in my original buy thesis, the attraction here is the upcoming spinoff that sees the break-up of Fortune's two disparate businesses.

I think that the market is underpricing the shares, as I explain here, and so I'm back to buy more. Bill Ackman of Pershing Square, already a longtime holder, recently upped his stakes in this situation when prices faded earlier this month. While we won't get prices that are quite so good, I still think there's substantial enough upside with limited enough risk to warrant buying more.

So tomorrow I'll be adding another $500, or about 3%, of my initial capital into Fortune.

Interested in Annaly or Fortune or have another stock to share? Join me on my discussion board and follow me on Twitter (@TMFRoyal).

This article is part of our Rising Star Portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time free stock picks. See all of our Rising Star analysts (and their portfolios) here.

Jim Royal, Ph.D., owns shares of Annaly. The Motley Fool owns shares of Fortune Brands and Annaly. Motley Fool newsletter services have recommended buying shares of Fortune Brands. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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