Table of Contents

1.  Market Update
2.  Market Vectors Gaming (BJK)
3.  Terra Nitrogen (TNH)
4.  Additional Investing Ideas
5.  Investor Trivia -- Lighting Up the World
6.  Featured Topic -- BRICs
7.  Free Investing Resources

Today's Top Stock Picks

Bet on the House with Market Vectors Gaming (BJK)
The market sell-off has created a rare value play in the gaming sector, and the odds of betting on BJK have never been sweeter.
Read More. . .                                             
Fertilizer Grew this Yield to  12.7%
The price and demand for Terra Nitrogen's (TNH) fertilizer has been growing -- and so has the dividend. TNH's current yield of 12.7% may be ready for picking. 
Read More. . .

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-- Lou Betancourt
Publisher

Market Update

It may have taken a unique combination of events that seemed almost implausible just a few days ago, but the market has finally ended a painful run of six consecutive down weeks -- finishing in the green for the first time since around Memorial Day.

Just as they have for the past few months, crude oil prices remained a major catalyst. But this time, oil had many on Wall Street cheering, not cowering. After hitting a record high above $147 per barrel, futures have tumbled more than $16 in recent days. The downward slide was in part precipitated by surprising news that oil supplies rose by three million barrels last week, versus expectations for a sharp decline.

The sudden turnaround in oil prices, a major cause of inflationary pressures, couldn't have come at a better time -- on the heels of a June report showing the second-highest consumer price inflation reading in over 25 years.

Meanwhile, the market also received another dose of reassuring news from the most unlikely of places -- the financial sector. On Wednesday, Wells Fargo (NYSE: WFC) not only posted second-quarter profits that came in ahead of targets, but the company also had enough confidence to boost its dividend payout by +10%. Over the next two days, other mega banks such as Citigroup (NYSE: C) and JP Morgan (NYSE: JPM) also reported stronger-than-expected earnings, proving that Wells Fargo's results weren't merely a fluke.

With hopes rising that the beleaguered financial sector can avoid a doomsday scenario, money has poured out of Treasuries and into stocks. Thanks to the sharpest two-day surge in more than six years, the Dow closed out the week with a hefty gain of almost 400 points.

By no means is the economy out of the woods just yet, but falling energy prices and upbeat news out of the financial sector are two big steps in the right direction. When the "all clear" is sounded and investors do finally dive back into the market, I'm betting that oversold consumer discretionary stocks will begin recouping their losses -- making the Market Vectors Gaming ETF (NYSE: BJK, $30.06) a great place to roll the dice.

Also in today's newsletter, High-Yield Investing editor Carla Pasternak has an idea for income-seeking investors looking to sprout some gains from the continued bull market for many agricultural commodities. As you'll read below, demand for Terra Nitrogen's (NYSE: TNH, $108.24) fertilizer is soaring, allowing shareholders to reap a plump 12.7% yield.

Good Investing!

-- Nathan Slaughter
Co-Editor
TopStockAnalysts Digest

Sooner or later, every good winning streak comes to an end -- but I wouldn't bet against the house for long. It has been a challenging period for leisure stocks over the past six months, but not too many have been hit quite as hard as those in the gaming sector. But thanks to this overdone sell-off, valuations for many former highfliers in this group have fallen back to earth, casting Market Vectors Gaming (AMEX: BJK, $30.06) as a somewhat unlikely, but attractive, value play.    

During previous economic downturns, casinos have been relatively immune to slowdowns in discretionary consumer spending. However, soaring energy costs, plunging home values and other concerns have made life tougher on resort operators this time around. Furthermore, there has been an industry-wide shift to counterbalance gaming revenues with those generated in the hotels, restaurants and other places off the casino floor. This has been a boon over the past few years, but has also left destination resorts more susceptible to economic headwinds than they were just a decade ago.

As a result, the gaming industry is finding this particular slump to be more painful than others. So after a multi-year rally, Wall Street has turned decidedly bearish and has been cashing in its chips.

For example, MGM Mirage (NYSE: MGM), owner of high-end Las Vegas Strip properties such as the Bellagio, MGM Grand and Mandalay Bay, has tumbled from $100 per share to under $30. Meanwhile, rivals like Boyd Gaming (NYSE: BYD) and Las Vegas Sands (NYSE: LVS) have shed over three-fourths of their value since this vicious downturn began. And it hasn't just been the resort owners that have suffered; slot-machine giant International Game Technology (NYSE: IGT) has also been in a freefall lately, as have others.

As is often the case, the punishment simply hasn't met the crime -- in recent months, visitation and gaming expenditures in most markets have been weak, but destinations like Las Vegas are hardly ghost towns.

According to the Las Vegas Convention and Visitors Authority, nearly 13 million people have flooded into Las Vegas through April of this year, almost unchanged from 2007. Furthermore, those visitors have filled up 90% of the city's 136,000 available hotel rooms and spent $2.7 billion in its casinos. Those two figures represent modest year-over-year declines, with occupancy rates and gaming revenues down -1.7% and -3.3%, respectively.

As might be expected during these tough times, some customers have been scaling back their gaming budgets. And the latest monthly figures from May do show further signs of deterioration. However, while business is soft and earnings are down, this slump reflects nothing more than temporary economic conditions -- not a long-term systemic problem.

The global appeal of gaming has grown unchecked for the past three decades, and major tourist destinations like Las Vegas, Macau, Atlantic City and coastal Mississippi will soon be as bustling as ever, churning out copious cash flows for property owners. So for investors willing to look a few years down the road, this relentless sell-off has provided a golden opportunity -- and BJK is the ideal place to place your bets on an eventual rebound.

The fund provides broad exposure to upscale casino owners like MGM, as well as second-tier riverboat operators, slot makers, equipment vendors, and online software developers. And less than 40% of the portfolio is tied up in the U.S. The rest is invested in promising foreign companies like Melco PBL -- a pure-play on the booming Macau market and a favorite with high-rollers. Last quarter, the firm's Crown Macau casino reported VIP table chip volume of $19.5 billion, more than double the $8.5 billion handled the prior quarter.

Looking ahead, continued technological advancements, favorable regulatory legislation in the U.K. and elsewhere, and rabid demand from both mass-market and high-income consumers around the world should all spell continued prosperity for the gaming sector.

It may take a few quarters for business to return to normal. But this sell-off has sweetened the odds considerably, and I don't want to be standing around waiting when the deck finally takes a turn for the better. Plus, May's dismal gaming figures will likely have many analysts ratcheting down their earnings estimates. So with the bar sharply lowered, it will only make it that much easier for gaming companies to beat expectations once things begin to improve, paving the way for a powerful rally.

As the prices of agricultural commodities have risen, so has the demand for fertilizer, much to the benefit of Terra Nitrogen (NYSE: TNH, $108.24). This Sioux City, Iowa master limited partnership (MLP) makes and sells nitrogen fertilizer (anhydrous ammonia and urea ammonium nitrate (UAN)) to farmers in the central and southern United States. TNH is 75.3% owned by Terra Industries (NYSE: TRA), which functions as the general partner and runs TNH's business affairs. Terra Nitrogen has some 18.7 million shares outstanding, but only about 4.8 million float freely. The rest are held by Terra Industries.

As an MLP, TNH must distribute all available cash after expenses to the general partners and unit holders. Since August 2007, TNH has distributed quarterly payments totaling $13.75. That works out to an annualized yield of 12.7% ($13.75/$108.24). Investors should be aware, however, that historical distributions have been variable. In 2007, TNH distributed a total of $7.64, but only $1.92 in 2006. Investors were paid $2.95 in 2005.

With demand for corn greatly increasing because of ethanol production and wheat trading at multi-year highs, fertilizer demand has been enormous, causing prices to zoom. In 2003, Terra's anhydrous ammonia went for $242 a ton. By 2007, the same product brought $380 a ton, a +57% increase. UAN did even better, skyrocketing from $97 a ton in 2003 to $195 a ton in 2007 -- a +101% jump.

Revenues and profits have risen just as dramatically. In 2006, for example, revenues were $425 million, but increased to $636 million in 2007. Net profit soared even more, from $46.2 million to nearly $206 million, a nearly +350% increase! Thanks to this increase, earnings per share for 2007 came in at $10.90. The one analyst who covers the partnership estimates TNH will earn $15.50 a share this year.

So far, sales and earnings for the first quarter are equally impressive. Sales went from just under $130 million during the 2007 first quarter to $175 million in the same quarter of 2008 -- a gain of +36.2%. Earnings per share did even better. They increased from $1.87 in Q1 of '07 to $3.93 in Q1 of '08.

Despite the impressive earnings growth, TNH's story is not without risks. The shares traded for under $40 in early 2007 and have since reached as high as $171, so the current pullback could be extended. Natural-gas prices, well behaved in 2007, have surged in 2008. Since natural gas accounts for about 65% of costs, this increase has the potential to crimp Terra Nitrogen's margins.

Still, as long as the demand for corn-based ethanol and wheat are robust, TNH should do well.

TNH offers a double-digit yield and a chance to surf the wave of rising food demand. Investors should be aware, however, that the stock has increased in price over the past couple of years, and any slackening in demand for fertilizer could lead to a further pullback in the share price. The stock is suitable for aggressive investors willing to accept the risk.