It has been a few minutes since my last article on Annaly (NLY), so I know everyone has been waiting for this update. Actually, the interesting point I wanted everyone to take note of is how well the stock has been doing of late.
In one month the share price has risen from around $16.80 to roughly $17.50. That's almost a 5% increase. It might seem like very much, but for a relatively stable price over the last few years, a one-month move up is something to take note of.
Why Is Annaly's Share Price Rising?
I suppose that is the big question, right? Well, in the face of all of the usual headwinds, such as pre-payments and mortgage refinancing, investors are obviously buying shares. As noted in my last article, given a stable interest rate, with a zero interest rate policy firmly in place, I suppose more investors see somewhat less risk.
Annaly is a more conservative (lower leverage) mREIT anyway, so there appears to be a higher comfort level than with other mREITs, like American Capital (AGNC). That might not be the only reason, however.
If you recall from some of my earlier articles, virtually all of the top management at Annaly has been converting options into actual shares, not just cashing out. I first noted the trend in this article:
One more bit of information can be found by reading this. Wellington Denahan-Norris, Vice Chairman, chief investment officer and COO of Annaly, exercised an option to buy actual shares of the company. 100,000 of them. She could have just exercised the options and taken the difference between her option price of $13.25/share and the current share price, but she chose the shares themselves.
This transaction happened on April 23rd and pokes another hole in some people's argument that insiders are not buying shares. Seems like they are.
I watched that trend through the SEC form 4 filings and followed up with this article, in which I noted the following:
...the recent insider stock purchases by just about all of the major executives, including Mike Farrell, gives us a clue that they feel that not only is there a good chance for capital appreciation, but perhaps the current dividend is not merely safe, but could be in for an upward surprise.
I suppose I have been correct, but anything can happen, right? Especially since much was made of a few analyst downgrades, like that of FBR to nearly a sell rating. The price, as you can see, has continued to move higher. What are people missing?
Yesterday, I read that TheStreet Ratings placed a "buy" rating on NLY. This article had an interesting statement as to The Street Ratings' reasoning:
TheStreet Ratings rates Annaly Capital Management as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
I could not agree more, and would also add that when insiders are buying, so am I.
In about three weeks or so, I expect Annaly to announce its quarterly dividend. Could the stock price be doing its customary run-up prior to going ex dividend? Perhaps. Is there something else going on? I think so.
If you take a look at the articles I have noted here, and perhaps some of the other earlier ones, you could find more reasons. I also would not discount the insider buying. Since those folks have a handle on the way things are going better than most anyone else, I feel all warm and fuzzy about the way things are going with Annaly.