The correct answer is      (C.) Capstead Mortgage

Capstead is a prime example of a well-managed company that has been charged with guilt by association. It exists for just one purpose: To buy mortgage-backed bonds. Its portfolio consists of about $7.6 billion worth of these income-bearing securities, and unlike most companies in the business of selling products and services, CMO has no inventory or equipment.

The company operates just like a bank: It borrows at low, short-term rates, and invests the proceeds at higher, long-term rates -- pocketing the difference. But Capstead doesn't invest in riskier, privately issued mortgage bonds. It sticks exclusively to debt backed by government-sponsored entities (GSE) like Fannie Mae and Freddie Mac. Debt issued by these agencies has long carried the implied backing of Uncle Sam. That guarantee against default suddenly became explicit when Fannie and Freddie fell under government control last year.

With demand for mortgage-backed bonds on the rise thanks to the Federal Reserve's $1.25 trillion mortgage-backed-securities purchase plan, prices for mortgage backed securities have propped up, and the fair value of Capstead's portfolio has increased as a result. Meanwhile, the company's core operations are benefiting thanks to unprecedented short-term interest rates near zero. As an indirect result, the company's current annual dividend of $2.32 a share equates to a yield of 17.1%. The Fed's vested interest in keeping MBS yields low and prices high means Capstead also has a powerful ally on its side.

That's why StreetAuthority editor Nathan Slaughter plans to add CMO to the "Yield Doublers" Portfolio he follows in his Half-Priced Stocks newsletter. Nathan's goal is to identify securities with price appreciation potential of +100% or more that are established, promising companies trading at a discount to their intrinsic net worth. In addition to CMO, Nathan has found nine other securities carrying double-digit price-appreciation potential that could give many investors' portfolios a much-needed boost. To learn the names of these securities, and to learn more about Half-Priced Stocks, please visit this link.