Eileen's picks

Become a banker

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Become a banker with a few clicks of the mouse, choose who you're going to lend to, how much you'll give them, at what rate.

Everyday people are earning higher rates than bank or credit union CDs, even as much as 9.49 - 12.81% returns on cash they decide to lend.

Have you heard of social financing, P2P Lending? It's relatively new, but is creating quite a stir in some quarters. In essence it is individuals making micro-financing loans to other individuals while cutting out most of the middle man banking fees.

In some ways it turns the clock back to "the good old days" when people went to the richest person in town to ask for a loan when they needed one. In other ways, it's cutting edge. Naturally, it's caught on first with young people. Take a look at Facebook's Lenders Club http://www.lendingclub.com/home.action

Now there are more and more sites, some of which are www.prosper.com www.virginmoneyus.com and www.lendersclub.com

One of the newest is Zopa CDs. They are a guaranteed and insured (up to $100,000) way to earn a fixed rate of return for a fixed term. Sounds like a bank. But it's different because a Zopa CD directly benefits the borrowers you pick by reducing their monthly loan payments. https://us.zopa.com/cd/Home.aspx

I haven't tried it yet, but I'm seriously considering a Zopa CD. Let me know if you've done P2P lending or borrowing and how it turned out for you.

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And then there's no interest lending

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I've become a small scale microfinancier, lending money to a young mother improving her small farm in Azeribaijan, to a young entrepreneur in Mexico who sells shoes through catalogs, and to a co-op of ten women in Senegal, West Africa. Astou Ndoye and her friends used the money to purchase pineapples, mangoes, hibiscus flowers, baobab fruit and tamarind and are now manufacturing and selling juices and preserves.

One loan I helped fund, just made in August, is already 67% repaid.

No profit motive; more along the lines of "Those who have more also have more of an obligation to give back". Donating to charity is one way, sharing knowledge is another, and lending money at a fair, reduced or even zero rate to people who need it is another way. On each loan I get my capital back which I then use to make more loans. No interest, just capital.

A Bicycle Trust for strangers you might say.

The Zopa idea appeals to me too. A person in the US starting a small business, for example, can be financed by a number of regular people like me who buy CDs and voluntarily contribute a portion of the interest they could be paid to the person starting the business as a way of helping them.

Personally I really like that concept. It's not charity, it's not taking a risk because the CD is insured, and it's an opportunity to help someone get ahead. I'm willing to give 2% of the interest I might receive back to a borrower whose reason for needing the loan interested or moved me.

Kind of in the spirit of the season.

I do my international microfinance lending through Kiva, an organization I really like. The Gates Foundation is assisting Opportunity International and there are others.

Think about becoming a microfinancier yourself as you celebrate the holidays and count your blessings.

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A stock to consider for the long term

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MSN's Jim Jubak brought to my attention a stock I like so much I bought it for my personal portfolio. You might want to consider it too.

What Jubak said a while ago that first caught my attention: "The company's biggest growth area is the Middle East, where dollar-rich oil producers are spending to build up their energy infrastructure and to diversify by investing in refineries and chemical plants. With projects diversified across industries from transportation to petroleum to pharmaceutical to defense, Jacobs isn't vulnerable to a downturn in any one sector. Although on current trend, it looks like the biggest danger at the company is too much business. The company's backlog is likely to expand 15% year over year to $11.3 billion when the company reports Nov. 6, according to KeyBanc Capital Markets."

Forbes recently named JEC one of the best 400 big companies in America, saying "Build longtime relationships with, and get repeat business from, blue chip firms. Simple concept. But that's how Jacobs Engineering thrives where other construction companies lag. Jacobs gets 75% of its revenue from repeat customers. Jacobs had record revenues in 2006 of $7.4 billion, up 32% from 2005, earned $200 million, a 50% increase. Jacobs' stock also rose 23% this year, showing the benefits it accrued by being entrenched in diversified areas, and by not being a housing firm. The company has accomplished all this largely by focusing on the domestic market, rather than dipping into the more tempting go-go international construction scene. But that's changing--slowly."

Recently Zack's said: "Jacobs Engineering Group, Inc. (JEC) is a provider of technical, professional and construction services globally. With a gain of 12.3% for the week ended Dec 7, it was a top-performing Zacks #1 Rank. Last week, the company received a couple of new contracts, including a hospital in Brussels and a refinery in India. Earnings estimates for the fiscal year ending September 2008 are up 7.5% over the past three months and 3% over the past 30 days. For its fiscal fourth quarter, Jacobs Engineering earned 68 cents per share, which bettered the consensus by more than 4.6% while also improving on a year-over-year basis. Revenues advanced 15% to $2.3 billion from $2 billion."

Morningstar currently says: "Aggressive Grow Profitability and Financial Health - both As Growth - B This stock is in an industry with a healthy number of competitors, and looking at its sales, it is one of the largest players. [It] has generated market-like returns over the past 10 years, but has done better than average the past five. Note that while a 10-year record is unavailable for this stock, it has been one of the strongest performers in its industry over the five-year period. Most companies in the engineering & construction industry have generated very low returns on assets over the past five years. This company, however, has posted results that are some of its industry's best. Note also that the company has had very strong profit margins, another key profitability measure."

StockScouter says, "A mid-cap value company in the capital goods sector, is expected to outperform the market over the next six months with less than average risk."

The analysts that have the best long term track record on successfully calling the ups and downs on JEC, according to Starmine, are UBS (86% accurate) said "Buy Reiterate" on 10/30/07 Ford Equity Research (80% accurate) said "Most Favorable Buy Upgrade" on 11/16/07.

Because I expect a lot more volatility in the market, I think I'll have the opportunity to augment my position at a good price, so I've put in limit orders to buy more at $90 and lots if it drops temporarily to the neighborhood of $80.

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