10 stocks to buy now

No matter how superb its business or how cheap its valuation, a complicated stock - especially one that involves mortgages - can get hammered in a market like today's. Annaly and its 16% dividend yield (that's not a misprint) is a prime example.

Annaly is a real estate investment trust, but it's not a conventional one. The company is basically a hedge fund that uses short-term bank loans to make long-term investments in mortgage-backed securities. That may sound scary, but Annaly buys only mortgages guaranteed by government-sponsored (now government-controlled) enterprises like Fannie Mae and Freddie Mac.

CEO Michael Farrell says the biggest question for Annaly shareholders has always been whether the federal government would stand behind Fannie and Freddie's mortgage guarantees if the duo ran into trouble. "And now we know the answer," says Farrell, referring to the government's bailout of Fannie and Freddie in September.

The problem is, investors are now too scared to care about any of this. When we recommended Annaly last year, the stock traded for $17 a share, had a price-earnings ratio of nine (based on projected earnings), and offered a dividend yield of 5%. (Like all REITs, Annaly pays out the bulk of its earnings as dividends.) Today, the shares sell for $13 with a forward P/E of five and a dividend yield of 16%.

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