After much thought, I have decided to write another article on Annaly Capital (NYSE:NLY). My recent article came under critical fire from a few "professionals" who questioned my opinions with a pointed attack on my content.
One of the issues that was focused on was the institutional, insider, and mutual fund holdings of Annaly shares in which I mistakenly noted at 87% of all outstanding shares. I still am not sure where I had found that number, but it was, and is, incorrect.
The actual percentage owned by institutions, insiders and mutual funds as of the latest records is 53.7%. Here is the breakdown from Fidelity Investments Research:
|Institutional Stock Ownership||31.1%|
|Institutional Mutual Fund Ownership||12.6%|
|Mutual Fund Ownership||2.1%|
Total Outstanding Shares: 970,269,506
In noting this percentage it is accurate to point out that approximately 500 million shares of Annaly stock are held in the accounts other than individual investors. To put that in perspective, American Capital Agency (NASDAQ:AGNC), another mREIT that has done quite well the last 2 years, has a total of roughly 240 million shares outstanding.
The "Other" category is that of the minor institutional, mutual fund and insider stakeholders not listed in the breakdowns.
That being said, there was a DECREASE in shares of Annaly held by these owners in the last quarter reported of 7.64% which was down from an INCREASE of 9.73% the previous quarter.
|Institutional Share Purchases||31.6M||96.1M|
|Institutional Shares Sold||64.0M||51.6M|
|Net Institutional Shares Purchased||-32.4M||44.4M|
|Change in Ownership||-7.64%||9.73%|
I would add that it is not unusual for major holders of any stock to re-balance their portfolios for numerous reasons.
Here is a list of the TOP institutional owners of Annaly:
|Top 10 Institutional Holdings by Shares Held|
|Name||Reporting Date||Total Holdings||Position Value||Outstanding |
|BlackRock Institutional Trust Company, N.A.||12/31/11||21.8M||$352.9M||2.25%|
|VANGUARD GROUP, INC. (THE)||12/31/11||17.8M||$287.8M||1.83%|
|Bank of New York Mellon Corporation||12/31/11||17.4M||$281.9M||1.80%|
|BlackRock Fund Advisors||12/31/11||16.1M||$260.7M||1.66%|
|Allianz Asset Management of America L.P.||12/31/11||15.9M||$256.8M||1.64%|
|STATE STREET CORPORATION||12/31/11||15.8M||$255.1M||1.62%|
|BANK OF AMERICA CORPORATION||12/31/11||12.4M||$200.0M||1.27%|
|UBS GLOBAL ASSET MANAGEMENT (AMERICAS) INC||12/31/11||10.9M||$175.6M||1.12%|
|ARTISAN PARTNERS LIMITED PARTNERSHIP||12/31/11||9.9M||$159.9M||1.02%|
These are NOT fly by night institutions and they have been quite consistent in holding shares of Annaly over the many years NLY has been a public company.
Mutual fund ownership is significant as well and for the last quarter there was an INCREASE in the number of shares held, by 1.78%. The previous quarter there was an increase in shares held by 10%;
|Mutual Fund Share Purchases||12.2M||18.9M|
|Mutual Fund Shares Sold||12.7M||12.3M|
|Net Mutual Fund Shares Purchased||-488.1K||6.6M|
|Change in Ownership||1.78%||10.00%|
Another positive sign that mutual funds maintain a significant position in Annaly shares.
Here is a list of the TOP mutual funds that own shares of Annaly:
|Top 10 Mutual Fund Holdings by Shares Held|
|Name||Reporting Date||Total Holdings||Position Value||Outstanding |
|VANGUARD TOTAL STOCK MARKET INDEX FUND (i)||12/31/11||11.6M||$187.0M||1.19%|
|ISHARES DOW JONES U.S. REAL ESTATE INDEX FD (i)||02/29/12||7.9M||$128.1M||0.82%|
|Allianz Fds-NFJ Dividend Value Fd (i)||01/31/12||7.8M||$126.7M||0.81%|
|Allianz Fds-NFJ Large Cap Value Fd (i)||01/31/12||7.8M||$126.7M||0.81%|
|ARTISAN MID CAP VALUE FUND (i)||12/31/11||6.4M||$103.4M||0.66%|
|THORNBURG INVESTMENT INCOME BUILDER FUND (i)||12/31/11||5.6M||$90.1M||0.57%|
|COLLEGE RETIREMENT EQUITIES FUND-STOCK ACCOUNT (i)||12/31/11||4.4M||$71.7M||0.46%|
|Prudential Jennison Mid-Cap Growth Fd (i)||01/31/12||4.1M||$66.2M||0.42%|
|Principal Equity Income Fd (i)||01/31/12||4.0M||$65.4M||0.42%|
|Legg Mason Capital Management Value Trust, Inc (i)||12/31/11||3.8M||$61.5M||0.39%|
Much was made of insider ownership as well. Here is a list of the top insiders and their holdings as of last report.
|FARRELL, MICHAEL A.J.||Chairman||2,494,392.00|
|DENAHAN, WELLINGTON J.||Vice Chairman||813,263.00|
|FAGAN, KATHRYN F.||Chief Financial Officer||252,982.00|
|KAZEL, RONALD DANIEL||Managing Director||156,938.00|
|KONRAD, KRISTOPHER ROBERT||Officer||146,035.00|
|FORTESCUE, JAMES P.||Officer||125,261.00|
|SINGH, R. NICHOLAS||Officer||117,900.00|
|KEYES, KEVIN T.||Officer||100,000.00|
|DIAMOND, JEREMY||Managing Director||83,750.00|
Over 4.3 million shares of Annaly stock is currently held by these top ten insiders. There are thousands of public companies that have ZERO share held by corporate executives or insiders. While this represents less than 1% of outstanding shares of NLY, it is significant that this amount is owned by corporate executives and my question would be why would they own ONE share of their company's stock if there were major questions of the business model.
Taking a look at the recent analyst reviews of Annaly, it has been duly noted that there has been a recent downgrade from outperform to perform by one such firm. That being said, Fidelity Research uses Starmine to research the stocks followed and they are weighted by an index rating as to their accuracy of stock ratings. The latest highest rated research firms reports are as follows;
NLY Equity Summary Score Firms
(i) Independent Firm
|Thomson Reuters/Verus (i)||100||Neutral|
|Ford Equity Research (i)||93||Neutral|
|EVA Dimensions (i)||82||Neutral|
As you can see there is a consistent theme of a "neutral" (or HOLD) opinion from 4 of the most highly rated independent research firms, on Annaly. They share my own opinion of holding shares, not selling shares.
A brief look at one of the reports highlights their main opinion:
Report Date: March 23, 2012
Annaly Capital Management Inc.
Price as of 03/23/2012
Copyright ©2012 Ford Equity Research fordequity.com
We project that Annaly will perform in line with the market over the next 6 to 12 months. This projection is based on our analysis of three key factors that influence common stock performance: earnings strength, relative valuation, and recent price movement.
The dividend history of Annaly over the last 10 years has been stellar, through both good and bad times. They have been able to navigate successfully to continue paying dividends throughout this period on a regular basis, at varying rates depending on their earnings.
From a low of $.10/share back in late 2005, to a high of $.75/share in late 2009.
Most recently, they have announced another dividend of $.55/share for the 1st quarter of 2012.
Based on these facts of public record, it is my opinion that owning shares of Annaly can be a very sound stream of income for dividend seeking investors.
The share price has traded in a very narrow range and is not considered a "value" stock, and I myself would avoid "trading" shares.
That being said, please be aware that when ANYONE states that they hold no shares either long or short, but DOES own options, whether they have calls or puts, they are absolutely seeking to profit from either a rise OR a fall in the share price.
For anyone to not disclose, or mislead other investors, is being disingenuous to say the least.
A disclosure should be made every time an article OR a comment is written in my opinion and should NOT be the responsibility of the readers to look back into history to find such information, especially when the writer or commenter is advising to either BUY or SELL a security.
Annaly continues to be a regular source of income for many shareholders both individual and institutional alike. I will continue to own shares myself, and consider adding to my position at times I feel is right for me.
There are risks involved in holding shares of ANY REIT which is one of the reasons they pay a high yield, as is the requirement by the IRS tax code to pay a minimum of 90% of all earnings in the form of dividends to all shareholders to maintain their REIT status.
Disclosure: I am long NLY.