Dear Mr. Berko:

Dear P.L.:

PennyMac Mortgage Investment Trust (PMT-$16.84) is a real estate investment trust put together by the former big shots at Countrywide Financial Corp., ostensibly to buy troubled home loans. Merrill Lynch botched the underwriting in April 2009 when it sold 16 million shares (it was supposed to be 20 million) at $20, and the stock quickly nose-dived to the $18 level.

PMT is controversial for two reasons: The miscreants who run it are former Countrywide executives, and part of its mission statement proclaims “to keep borrowers in their homes.” Oh, my!

PMT is one of the numerous mortgage REITs investing in portfolios of “scratch and dent” mortgages that have missed payments, mortgages that were approved with missing documentation (which seems to have been a Countrywide specialty) or mortgages in which the borrowers have low credit scores. These mortgages are usually acquired at a huge discount from insurers that need to clean their balance sheets or purchased via liquidations of failed FDIC-insured banks.

So as of Dec. 31, 2010, PennyMac had six employees, assets of $589 million, zero long- or short-term debt, current liabilities of $289 million and a book value of $19.02 per share. Net income was $1.44 per share, or $24.5 million, and the $1.68 dividend yields 10 percent. The risk is moderate; the dividend is secure and may be raised this year. If the economy continues to improve, there may some capital gains potential. I think your broker gave you good advice.

Zipcar Inc. (ZIP-$20.02), which went public last April at $18, doesn’t float my boat. This hot new issue rents cars by the hour in Boston, New York City, Atlanta, Chicago, Baltimore, Philadelphia and a few other larger cities. Again, I must agree with your young broker.

ZIP, founded in 2000, has made zippo money since it rented its first Yugo. In 2009, the company lost $5 million, and last year, with revenues of $186 million, Zipcar locked $14 million in losses on its income statement. Management has told naive shareholders that it doesn’t expect to earn a profit this year, either.

Members pay $60 per year to join, and the hourly rentals run between $8.50 and $13.25. ZIP has 600,000 members and 8,500 cars in 14 metropolitan areas and 230 college campuses. Members pick up the cars at garages or parking lots by swiping their cards on a windshield reader. However, Hertz and the other “biggies” have taken notice. Hertz now has more than 700 hourly cars in the Big Apple.

Meanwhile, Zipcar’s income statement and balance sheet may take some hard hits unless management can show a profit soon, and that seems unlikely. I applaud your broker on another good call.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or email him at malber@adelphia.net. ©2011 Creators.com