Mardo Iknadiossian

Mardo Iknadiossian
Contributor since: 2011
Company: My Linkedin
Thanks Elliot,
Singapore wasn't mentioned because it isn't in ELD's portfolio according to their website. As for ALD, it looks very interesting. It is outperforming ELD which is one of the reasons it has a lower yield. The outperformance could be attributed to strong domestic demand in Asian economies which makes them less reliant on Europe for exports and lower inflation rates than Latin American countries.
It would be interesting to study the difference between the latin american and asian economies. I will consider it in a future article, I appreciate your suggestion.
Hi Mark,
-what's the 12% that you are talking about?
-For equities, I think they will be cheaper soon due to the strengthening of the dollar. Long-term however, Brazilian equities are a great bet. They are becoming fiscally more responsible, a testament to that is the recent increase of their credit rating by S&P. Brazil is self-sufficient when it comes to energy and is a net exporter. It has a growing middle class and is working on lowering income inequality.
Thanks Elliott!
Great Article Todd!
I was just wondering if the "shrinkage amounts of '$150 million to $200 million per year'" were correct, they seem negligible for a $10 trillion market.
Thanks Casey,
Haven't looked into IVR before, but from what I see now I think it is comparable to MFA because it has both Agency and non-agency securities, its portfolio is geared more towards the agency securities than MFA's though, making it more conservative. Its leverage however, is 5.2:1, considerably more than MFA. The two different aspects might balance and make it a better investment, but haven't done enough research to make the call. I will look into it and will get back at you in the near future.
The high yield makes it a very interesting stock. Thanks for bringing it up!
Thank Chirpsithra! appreciate it!
Great point searcher,
You are right, book value is very important when valuing these stocks, and it is Annaly's and AGNC's policy to select mortgages that will help maintain or even increase book value that is why I am long Annaly and would recommend AGNC too.
I do believe that considering the ability of the companies to maintain their dividend is also important. Ever since Operation Twist was announced I have been getting questions about mREITs' ability to keep their dividends, that is why I chose to frame my article from that angle.
Hi Conventional Wisdumb,
While the SEC threat is there, it is not likely. Even in the article you mentioned Mike Farrell the CEO of Annaly Capital said that this is "not something we are overly concerned about."
A fellow contributor wrote a great article explaining why:
Mardo Iknadiossian
Hi Freya,
Thanks for the comment. The EPS number that you refer to is based off of the "weighed average number of shares outstanding."
The weighted average of outstanding shares is a calculation that incorporates any changes in the amount of outstanding shares over a reporting period. It is an important number, as it is used to calculate key financial measures such as earnings per share (EPS) for the time period.
Read more:
Hi jbowen28,
The high rate of change you point out was due to abnormal events such as rapid interest rate hikes and market turmoil. If you take out the abnormal events, the stock has remained relatively flat. Currently, the stock is trading at the same price it was in 2002.
Hi northhills21,
I am in the process of writing an article that includes AGNC. As for CIM I am not that familiar with it, however, the same concepts applied to Annaly also apply to it.
Hi dava,
The dividend declared was about 9% lower than last quarter's dividend, which was to be expected because of higher financing costs that resulted from fears of US default during summer. Other causes of a lower dividend might be higher than expected prepayment rates. As I mentioned in my article, Annaly's mortgages are bought at a net premium which results in losses as refinancing activity increases.
Main drivers of the volatility behind mREIT stocks is the European debt crisis. Besides that, the effects of Operation Twist are more or less priced in. Any major dip in my opinion is a buying opportunity.
Hi Vol Fan,

Thank you, I enjoy doing research and writing and also enjoy seeing appreciation. Volatility in mREITs have been proven to be buying opportunities in the past. I remember when there was a fear of default by the US Government NLY crashed then quickly regained those losses just like what we saw these last two days.
There is a chart in my first article that shows how dividend reinvested in NLY has resulted in tremendously high rates of return year after year over the past ten years.
There are two possible negatives that are really big issues. One is government intervention in the housing market to encourage refinancing, and second is as you said increasing interest rates. Rate changes don't bother me as much because they can be hedged effectively, and like you said they are likely to stay low for an extended period of time. My main concern is government intervention that can change the dynamics of the industry. Another government meddling is whether to tax REITs differently.
All we can do is wait and see, however without intervention that can change the way the game is played, mREIT are buys, especially NLY.
Hi jhhughes,
Yes, that is part of the reason why NLY went down today. Annaly is part of many indices and ETFs so when selling pressure starts in a stock it eventually spreads to other stocks in the same index or ETF.
The other reason is risk of illiquidity in the repo markets. Greece's announcement today that it will miss its deficit reduction targets raised the risk of default of European debt, increasing borrowing ability and cost. This of course would hurt the spread that mREITs need to turn a profit.
Annaly has reduced its financing risks by increasing the maturity of its short-term loans, decreasing leverage and diversifying its financing sources. That is why I think Annaly is still a buy.
I have discussed Annaly's risks and how it hedges against them in an article, here's the link:
Great point on Annaly Capital Efsinvestment. My recent article discussed the points you made about the portfolio of Annaly's mortgage-backed securities.
Agreed, one of the most valuable asset the firm has is its management team and CEO. I discussed this in my first article where I talked about Annaly's risks and its hedges. Here's the link:
Hi Ken,
I am rating it a Hold because when I was writing the article the stock was trading at around $17.60 (more or less unchanged from the past few weeks) a share while at the same time risks had risen since we don't know what kind of a refinancing program the government will push for or how the IRS will rule on its tax status. So there wasn't much upside to the stock, but downsides was minimal too as I have explained in the article and my previous one. As the stock goes lower however, I think Annaly should be bought as a long-term investment.
Thanks for the comments everyone I appreciate it.
Those are very good points Harry and Fred I will look into them and respond with an article soon.