The most undervalued and unloved stock, according to Steve Leuthold's Undervalued and Unloved (UGLYX) mutual fund, is 12% Letter pick Citigroup (C). The largest financial firm in the U.S. is the fund's top holding at 2.91% of the portfolio. The bank is trading at 52-week lows – 23% off its high. The market continues to punish Citi, despite support from the "smart money" –
Eddie Lampert, for one. Citigroup trades for 1.71 times book value, while the higher-regarded Goldman Sachs (GS) trades at 2.51 times book.

Buffett on the move... Berkshire Hathaway sold its entire stake of True Wealth pick PetroChina (PTR). Buffett made seven times his investment in PetroChina but told a Fox News interviewer, "We still sold it too soon. I left a lot of money on the table." In the same interview, Buffett rebuffed rumors that he was interested in Bear Stearns.

Are you surprised that during the mortgage boom brokers got bonuses for hosing borrowers in any way possible? We weren't... Fremont Investment & Loan, one of the notorious subprime lenders, paid its brokers bonuses for selling loans at a higher rate than the borrower qualified for. Brokers also got checks for implementing penalties for early payment. Now Fremont is the focus of a Massachusetts-led lawsuit.

We wrote it, did you buy it?

On December 6, 2005, Career Education was notified by the Southern Association of Colleges and Schools that seven of its campuses and an online campus were being placed on "probation." (I wonder if it's double-secret probation? Think they had a toga party? Or a road trip?) None of this stuff worries me. Why am I so sanguine? First, if there is a backdating scandal, as I suspect, the Justice Department and the SEC will go after the board of directors, not the company. It doesn't make any sense to punish shareholders for the actions of the board. Second, the Department of Education's decision to allow Career Education to open two new schools is a clear signal that nothing is seriously amiss. – PSIA, October 2006

Shares of Career Education (CECO) jumped more than 14% yesterday on news that the SACS finished its investigation of CECO's campuses. Readers are up more than 45% on the recommendation.

"The Club at Brickell, with 54 foreclosures, holds the distinction of having the most foreclosures of any building in Miami-Dade and Broward counties. The Vue at Brickell, a condo conversion just two blocks away from the Club, ranks No. 3 based on 49 foreclosure actions. The Jade at Brickell, a nearby bayfront luxury building that had the highest number of foreclosures at the end of the second quarter, now ranks fourth with 42 actions.

"The three Brickell towers account for 37 percent of the entire number of foreclosure actions filed in the top 10 buildings in South Florida, according to the Condo Vultures report. Condo Vultures produced the report using data generated by the courts of Miami-Dade and Broward counties.

"On a dollar basis, the three Brickell towers account for more than $113 million in loans and fees owed to the lenders and condo associations that are pursuing foreclosure. The dollar figure represents 66 percent of the $171 million in default in South Florida's top 10 foreclosure buildings." – Condo Vultures blog

12% Letter editor Tom Dyson is heading back to Miami to find the best real estate deals in the country's worst market. We're making sure he adds these three buildings to his list.

And Tom Dyson tells us how to prepare for the Fed's next rate cut in today's DailyWealth.

New highs: Baxter (BAX), CGG-Veritas (CGV), Encana (ECA), streetTRACKS Gold (GLD), Coca-Cola (KO), Petrobras (PBR), Taiwan Fund (TWN).

In the mailbag, it looks like readers are excited about Stansberry Focus. We'll get to work. If you must interrupt... feedback@stansberryresearch.com.

"To be brief – hell yes. My biggest complaint about newsletters in general is that the 'need' to generate 'new' ideas every month leads to poor recommendations when there are no good ideas but a newsletter is due. Your letters will on occasion refuse to make a recommendation when no good ones are available but it's always obvious they don't feel they can go very long without one. I would be thrilled with a letter such as you describe."
– Paid-up subscriber Gene Colgan

"Yes, yes, yes... bring on this super safe list... make it available to alliance members like you do you alliance 16 list... this is just the thing I've been trying to do with your picks myself... I'd love to have more input with your recomendations... and probably end up following your list anyhow."
– Paid-up subscriber Brad G

"Yes Yes Yes! My answer is Yes. Did I say Yes?" – Paid-up subscriber Scott

"You wrote: 'Our questions? First, if you can accept that we tend to make our best investments in the least risky situations, why would you put money into anything but our "sure things?" And, second, would you pay to receive a "focused" list of recommendations from across all of our newsletters, if each of recommendations qualified as a 1-ranked investment?'

"I have no answer to #1. I haven't bought Porter's riskier recommendations for some time now. As for #2, I'd buy it if it were fairly cheap. After all, it's a resale of existing research so the additional cost to your is zero. So you need to price it according to its value to us, which I think is probably tricky to calculate. And I think only 1 or 2 recommendations a year is a troublesome selling point unless it's a pretty cheap newsletter.

"I end with a question. Aren't pretty much all of Extreme Value's recommendations rated a risk of 1?" – Paid-up subscriber Ken Mosher

"Your idea for Stansberry Focus is superb. Many of us follow you and your writers for the QUALITY of your collective work, not the quantity.

"ONE home run recommendation per year would make me very happy. Two would make me exuberant. Thanks again for all your excellent work has done for the quality of my life. You and your SR writers are THE BEST!!"
– Paid-up subscriber Carl Johnston

We leave you today with a letter from activist investor Robert Chapman. Chapman, head of the hedge fund Chapman Capital, is famous for his seething e-mails to disagreeable takeover targets. This letter is from a recent 13D filing with the SEC announcing that Chapman's firm is now the largest shareowner of Building Materials Holding (BLG). Enjoy...

May 25, 2007
Mr. Paul S. Street
SVP: General Counsel & Sec
Building Materials Holding Corporation
Four Embarcadero Center
Suite 3250
San Francisco, CA 94111
Office: (415) 627-9100

Mr. Street,

Given your extensive legal training at such a lower tier firm as Moffatt, Thomas, Barrett, Rock & Fields, I understand why it is that you consider Mr. Wilson's E-mail address (wilson@bmcwest.com; given to me by no fewer than two other senior executives at BMHC) so proprietary. The reason is that you are poorly trained, and apparently incapable of making sound legal and ethical decisions as it relates to the advisor to the largest owner of the company paying your excessive salary (and other compensation).

My strong advice to you is the following: remove your head from the dark orifice in which it seems naturally to find itself, and thereafter find a means of distinguishing material, non-public information from a widely available E-mail address being used to communicate a public document with Mr. Wilson. If that is not a feat within your mental capability, please pack up, head east and get back to Boise at your first opportunity.

Happy Memorial Day.
Robert L. Chapman, Jr.
Managing Member
Chapman Capital L.L.C.
Pacific Corporate Towers
222 N. Sepulveda Blvd.
El Segundo, CA 90245
Office: (310) 662-1900
Web: www.hedgefunds.com

Regards,

Sean Goldsmith
Baltimore, Maryland
October 19, 2007

Stansberry & Associates Top 10 Open Recommendations

Stansberry & Associates Hall of Fame