Annaly Mortgage Management Raises $1B on Secondary Offering

Friday afternoon I decided to buy Annaly Capital Management (NLY) at $15.66 on the news that it was able to raise a billion dollars on a secondary offering. It’s not often that I piggyback on Jim Cramer, but I think he is dead on with this recommendation.

Annaly’s capital raise is a brilliant move here, as it gives the company a huge chunk of cash to buy distressed mortgage backed securities. Because of this capital raise, NLY is going to be able to capitalize on opportunities out there in the market. With a 6.6% yield and a bright future, I have to get behind this name.

Comments

[Patrick1980SC]

This would be a fine investment thesis if Annaly invested in "distressed" RMBS, which they don't. They only invest in GSE-backed MBS, which have maintained liquidity and price visibility throughout the credit crunch. That's why Annaly has enjoyed a relatively strong stock price and can do a huge accretive offering at this point. I think it's worth considering that Annaly's management is compensated based on book value, which is immediately raised in any accretive offering.