a private stock briefing report a secret …...a secret land deal worth 2,500% in profits dear...

A Secret Land Deal Worth 2,500% in Profits

A PRIVATE STOCK BRIEFING REPORT

by BILL PATALON

A Secret Land Deal Worth 2,500% in Profits

Dear Private Briefing Reader,

To date, there are 7,524 stock frontrunners operating across America.

But one of these frontrunners – a 73-year-old from the Bronx – stands out as being one of the most prolific and richest of the lot.

His name is Mario Gabelli…

Wall Street likes to call him “Super Mario.”

The moniker fits in more ways than one…

Not only is Gabelli one of the richest people in America – with a net worth of $1.5 billion…

But he’s also one of the most prolific stock pickers in America today.

Through his fund – Gamco Investors – Mr. Gabelli has $47 billion invested in the market – a 78% increase since 2009.

His salary has climbed from $56.6 million in 2010 to $88.5 million today.

Unlike other stock frontrunners, Gabelli spends years analyzing a company and its executives before he decides whether to invest. But this extra “legwork” has paid off in spades.

Indeed, an institutional client who invested $10 million with Gamco in 1978 would have seen that money grow to $2.2 billion as of March 31, 2015. The same investment in the S&P 500 during that time would have grown to $645 million.

And Super Mario eats his own cooking. Gabelli’s income is tied to an agreement he struck when he founded the firm.

Investor’s ReportFrom: William Patalon III, Executive Editor, Money Morning

http://moneymorning.com/author/william-patalon-iii/

PRIVATE BRIEFING Investor’s Report

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It’s simple. He earns 10% of Gamco’s pretax profit as an incentive-based management fee.

He receives no base salary, no stock options, and no restricted awards, according to company filings.

So he only gets a piece of what he makes for his clients. If they don’t make money... neither does he.

And right now his portfolio is littered with stocks that belong to one sector of the market: aerospace and defense.

This happens to be a sector I am very familiar with…

In fact, not long after launching Private Briefing, I urged my readers to buy The Boeing Company (NYSE: BA). You see, in addition to building its iconic line of commercial jetliners – such as Air Force One – Boeing also makes defense-related products such as B-52 bombers, fighter jets, attack helicopters, and airborne early warning systems.

Boeing also operates as the “sustaining engineers” for the International Space Station, making sure it’s functioning properly and that experiments are transported safely to the Station.

Since telling my readers to buy Boeing, the stock has risen 114%.

So as a long-time student of that sector, I know that aerospace and defense outperformed the S&P by 100%.

In fact, aerospace and defense share prices have a way of increasing in value year after year no matter which party holds the White House or Congress.

They even surged during a time when the U.S. Budget sequester was causing the Pentagon’s budget to shrink by tens of billions of dollars.

In 2014, for example, U.S. military spending fell by 6.5%, according to the Stockholm International Peace Research Institute.

Meanwhile, major defense stocks like Lockheed Martin Corp. (NYSE: LMT), Raytheon (NYSE: RTN), General Dynamics Corp. (NYSE: GD), and Northrop Grumman Corp. (NYSE: NOC) remained


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immune to these cuts. In fact, they recently traded at all-time highs…

To give you an idea of just how effective this man is at boosting stocks, the list of companies in which he’s already purchased more than 100,000 shares includes

The Boeing Co. (NYSE BA), United Technologies Corp. (NYSE: UTX), Kaman Corp. (NYSE: KAMN), and Textron Inc. (NYSE: TXT).

These names should ring a bell. They’re among the very biggest aerospace defense contractors in the world. Altogether, this stock booster owns interests in 19 of them.

But of all the defense stocks that this Bronx frontrunner is now pumping cash into, one in particular stands out.

Because even though it’s one of the smallest defense stocks on the market, it holds some the industry’s greatest potential.

Lockheed Martin Corporation (LMT)

220

200

180

160

9/14 3/15 9/15 3/16

Raytheon Company (RTN)130

120

110

100

90

9/14 3/15 9/15 3/16

General Dynamics Corporation (GD)160

140

120

100

3/14 9/14 3/15 9/15

Northrop Grumman Corporation (NOC)

200

175

150

125

9/14 3/15 9/15 3/16 Source: Yahoo! Finance


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This Stock Is Like a Coiled SpringI’m talking about Sacramento, California-based Aerojet Rocketdyne

Holdings Inc. (NYSE: AJRD).

AJRD operates primarily as a manufacturer of aerospace and defense products for the U.S. government. They design specialized engines that intercept missiles.

They’ve also powered nearly all of NASA’s manned spacecraft, as well as the space probes that have traveled to nearly every planet in our solar system

The original company was founded as General Tire & Rubber Company in September 1915 and has evolved greatly over the years through a diversified mix of acquisitions. Despite their small size, they’ve become a quiet leader in the aerospace and defense industry.

In World War II, the company’s jet-assisted take off (JATO) units allowed military planes to launch from short runways and aircraft carriers. During the Cold War, Aerojet solid rocket motors powered the dependable anti-aircraft HAWK missile that is still being deployed more than 60 years later.

The company’s contributions to America’s space program have been equally significant. The company was at the heart of America’s Space Age, helping Apollo 11 transport the first astronauts to the moon’s surface and safely back home in 1969 and taking part in every space shuttle mission flown, among many other milestones.

Yet despite all these monumental achievements, Aerojet remains one of the market’s most undervalued assets.

I first recommended the stock to my readers back in February 2013, when it was still known as GenCorp Inc. and was trading at $11.40 a share.

The timing of that recommendation was intentional.

Just a few months before, GenCorp had inked a $550 million deal to buy the Pratt & Whitney Rocketdyne unit from United Technologies Corp. (NYSE: UTX).


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In our view, GenCorp’s stock was akin to a coiled spring.

And when it was released – ignited by an outside catalyst or investors finally recognizing its potential – we said GenCorp could double.

That’s precisely what happened.

From that recommendation price of $11.40, GenCorp’s share price rocketed to $24.35.

Even now – despite the recent sell-off that has whacked so many high fliers – the stock has only slipped to a bit less than $16.

Over the long haul, this stock is going higher.

Here’s why…

New Government Contracts Ignite AJRD’s Growth Engine

The company has recently been awarded two major contracts.

One from the National Aeronautics and Space Administration (NASA) is worth $1.16 billion.

North Korea’s “Satellite” Launch Means More Business for AJRD

Rocket motors have become a “growth industry.”

North Korea recently put an observation satellite into Earth orbit.

The launch was viewed as a “strategic provocation” by its neighbor to the south and also played right into the hands of the U.S. military.

South Korea is now seriously considering the adoption of a U.S.-developed missile interceptor – a move Seoul was essentially dead-set against just a few short weeks ago.

Aerojet figures to be a big beneficiary of the continued proliferation of nuclear weapons globally, because the company makes the propulsion systems in missile interceptors.

Russia and China will force the U.S. military to boost its investments in advanced missile interceptors. And many or most of those, too, will be powered by Aerojet rocket motors CT.


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The contract, which runs from November 2015 through September 30, 2024, is to restart the production line for the RS-25 engine.

The RS-25 is the world’s most reliable rocket-booster motor. It’s often referred to as the Space Shuttle Main Engine – for good reason: For 30 years, this liquid hydrogen/liquid oxygen booster was the power plant on U.S. Space Shuttle flights.

In fact, it was used on all 135 missions and was the launch motor behind such achievements as the International Space Station (ISS) and the Hubble Space Telescope.

These production lines have been significantly improved and made more efficient since the retirement of the space shuttle program.

The first flight test of the new motors is slated for 2018. It will be configured for a 70-metric-ton lift capacity and carry an uncrewed Orion spacecraft.

As it evolves, the RS-25 will be the most powerful rocket ever built and provide an unprecedented lift capability of 130 metric tons.

With “deep-space destinations” now on the drawing board, NASA needed to find a reliable power plant for its Space Launch System (SLS).

As part of the contract, four Aerojet RS-25s will be clustered together and used as the primary engines that will eventually take men to Mars.

The remaining $200 million of the $1.4 billion in contract awards was made by another Private Briefing favorite – The Boeing Co. (NYSE: BA).

Under the Boeing award, Aerojet will “complete the design, development, qualification, certification and initial production” of the propulsion system for the NASA CST-100, a space capsule that’s been nicknamed the “Starliner.”

The Starliner is scheduled to start ferrying astronauts to the International Space Station as early as 2017.

This is all part of something we’re calling the “New Space Race” – a growing private-sector participation in what has traditionally been a NASA venue.


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The commercial-satellite-launch business is projected to grow to nearly $8.4 billion by 2020, says researcher Frost & Sullivan. And space tourism is expected to become a $1 billion business during that same timeframe.

You can bet Aerojet will design launch systems that have the “right stuff ” to take a big bite out of that market as well.

No wonder the company has a backlog of $3 billion in orders, of which $2.3 billion is completely funded.

But there’s another reason AJRD’s shares are set to soar.

AJRD’s Hidden $530 Billion Real Estate “Wrinkle”

In addition to the proliferation of nuclear missiles and the “New Space Race,” Aerojet is poised to benefit from a stealth real estate deal.

Back in the 1950s, in Aerojet’s very early days, the company purchased 12,000 acres of prime highway real estate along U.S. Highway 50, about 15 miles outside of downtown Sacramento, California.

This land has a storied history, having once been a thriving gold field. The Natomas Company mined this area from the late 1800s until 1960.

It is one of the largest single-owner land tracts suitable for development in the region and is a desirable “in-fill” location surrounded by residential and business properties.

The real estate, owned by AJRD’s wholly-owned subsidiary Easton Development Company, LLC, was originally acquired for use in core operations.

But changes in propulsion technology and a relocation of AJRD’s core operations made approximately half of the real estate unnecessary for the company’s operations.

Now the company is using Easton to rezone, lease, and sell portions of the land.


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Currently, the development plans are mixed use and include commercial, residential, and office space.

According to the developers, Easton is being developed into “a collection of five distinctive planning areas, called “boroughs.” Each borough has been planned as a distinct community. Together they provide a rare balance of residential, educational, professional and recreational uses – served by two light rail stations.”

About a quarter of the available land will be devoted to “office and commercial uses, schools, roads and other community resources.”

And the company has been successfully monetizing the land recently, as demonstrated by its recent sale of a 703 acre parcel for $57 million that was completed in June 2015.

If you look at these prices on a per-acre basis, they hold this land on their books at an average price of $11,667 per acre.

While it’s difficult to precisely quantify the value of AJRD’s real estate portfolio, the recent sale yielded a value of $81,081 per acre.

That’s an astounding 594% profit per acre.

Based on that, AJRD should be able to sell the remaining land for up to $530 million, or more than 50% of the market cap of the entire company.

That’s cash the company can use to buy back stock, pay a special “one-time” dividend, reinvest in its business – or some combination of the three.

Or AJRD could hold onto portions of its land and enhance cash flow in the long term for investors by generating significant rental income.

And here’s the best part:


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Because of U.S. accounting rules, the land is carried on the books at historical cost – about $32.8 million.

That means this hidden asset is being overlooked by most investors, leading them to vastly undervalue the company. But not Super Mario Gabelli.

Gabelli’s fund – Gamco – currently owns over 5 million shares of AJRD. In fact, Gamco is the biggest AJRD shareholder by far, holding roughly 8% of the outstanding shares and a $77 million position in the stock.

That means one of the smartest – if not the smartest – gurus on Wall Street is betting this year’s salary on AJRD.

But Super Mario isn’t the only stock booster that owns AJRD.

The second largest stake is held by Warren Lichtenstein of Steel Partners, with a $67.6 million position. Lichtenstein also happens to sit on the board of directors.

In fact, an “upper tier” of noteworthy hedge fund managers have been increasing their holdings.

At the end of the third quarter of 2015, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 59% from the earlier quarter

Indeed, fully 82% of all of AJRD’s shares are owned by institutions or mutual funds.

So you might ask yourself, “What do these guys know that Wall Street doesn’t?”

They know that Aerojet’s hidden real estate tract puts the stock in the proverbial catbird seat, compared to its peers.

Because a land sale of this magnitude could triple the company’s revenues in a matter of months.

Analysts are projecting AJRD will grow earnings at a rate of 85.7% in the next quarter, thoroughly crushing the industry average, which calls


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for EPS growth of just 10% in comparison.

Next year they’re projecting the company will grow at a robust 19.3%, versus a paltry 3.2% for the industry. The consensus target price for the stock is $26, a healthy boost of 56% from the stock’s recent close of $16.68.

But if you add in the likely half a billion dollar real estate windfall, AJRD shares could easily top $50 a share from here... giving us a 300%+ return in just months.

That’s why I’m urging you to join the stock Frontrunners, led by Super Mario Gabelli, and buy Aerojet Rocketdyne Holdings Inc.

It promises to be a great ride.

I’m Bill Patalon

Thanks for joining me today.

WEBPB0616-579

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a private stock briefing report a secret …...a secret land deal worth 2,500% in profits dear...

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