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Matt Priore

 
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  • Update: American Capital Agency Earnings - Impact On My Bottom Call [View article]
    Hi Chris,

    Thanks for the piece, nice article and good call. I wanted to note that taxable income isn't a concern for AGNC as you have laid it out. The low figure comes from roughly $1.8B in losses from 2013 that AGNC is carrying forward, offsetting gains where possible on income in 2014 and preventing it from being taxable. This allows them to more quickly grow book value. They have just under $1.375B left ($3.89/share) and this will continue to suppress the taxable income figure going forward (these figures should be pretty straightforward if you look at page 23 of their most recent presentation http://bit.ly/1kciTgg).
    On the Q1 call management discussed this artifact and guided that taxable income would be an insignificant figure in the near future / they reiterated the .65/share dividend was important to them. Based on that guidance, the low minimum distribution requirements associated with low taxable income figures aren't really a concern here, and since they will be continually taking these losses against gains, there really isn't anything they will be doing to try and improve that figure in Q3 and Q4.
    Aug 15 01:30 PM | 4 Likes Like |Link to Comment
  • American Capital Agency Had A Tremendous Q2 2014, But Was It A Flash In The Pan? [View article]
    Hi David,

    Gotcha - yeah I understand what you were going for now / how you got there. Thanks for clarifying, just wanted to make sure I wasn't missing something critical you had caught.
    Aug 8 03:26 PM | 1 Like Like |Link to Comment
  • American Capital Agency And The Great mREIT Price Adjustment [View article]
    Hi Pablomike,

    I am not disagreeing with you, simply clarifying the strength of your statement. What you said in this comment is definitely true, but for any readers who may not listen to the full earnings calls or that may not have been invested in AGNC for very long, they might imply from your first statement that management's mindset is that the dividend should be as small as possible.
    Aug 5 12:44 PM | Likes Like |Link to Comment
  • American Capital Agency Had A Tremendous Q2 2014, But Was It A Flash In The Pan? [View article]
    Hi David,

    Very nice analysis and a great read. What exactly do you mean when you say these are now gone? As far as the loses, they still have $3.89 in losses from 3.89 to take tax free (page 23 of the presentation http://bit.ly/1kciTgg). Did you mean the income from TBAs will only be there in Q2? If so, AGNC increased its TBA exposure Q/Q; can you further clarify that comment?
    Aug 2 01:12 AM | 1 Like Like |Link to Comment
  • American Capital Agency And The Great mREIT Price Adjustment [View article]
    Hi Pablomike,

    Kain and the management team have always said maximizing economic return for investors is their goal.

    Generally, increasing book value and using that equity to drive further profits is a better way to do it then paying dividend beyond what is necessary out of that book value. That being said, if that was their only goal they could have paid far less than .65 in a dividend this quarter and just hoarded book value. Investor perception is also a factor.

    I very much believe management feels the current dividend is sufficient and will not be raising it until they need to - however the issue isn't as cut and dry as 'NAV > Dividend' and management certainly has never even hinted that the dividend is a low priority to them.
    Jul 30 11:08 PM | Likes Like |Link to Comment
  • MannKind: Let It Dip A Bit More, Then Cover/Buy [View article]
    Hi Quoth,

    Nice article, thanks for the guidance. I agree with your opinion, but I am curious, why do you not view a partnership deal similarly to the FDA approval event? As you can tell from the basis of your thesis and these comments, there are a huge number of frothy investors excited over what will happen to MNKD's price once the partner is announced (which is pretty much a guaranteed event even if its a few extra weeks). Do you not believe that this bounce is somewhat priced in and too many short term buyers will be looking to cash out after the news versus new people 'stunned' about a partner will be coming in to buy? Its obviously not that black and white (especially with a momentum stock like MNKD and with 30% of the float already shot) but I'd like to hear your thoughts on that viewpoint.
    Jul 30 02:20 AM | Likes Like |Link to Comment
  • American Capital Agency And The Great mREIT Price Adjustment [View article]
    Hi 10392701,

    Thanks for the comment-

    I could certainly be wrong about the dividend. My opinion is that management is more eager to build book value than increase the payout so this will be their priority for as long as possible. Most casual investors do seem to favor AGNC because of the dividend however, and you are right that their interest income being almost 40% higher than their payout could imply some pressure to do so.
    Jul 30 12:59 AM | 1 Like Like |Link to Comment
  • American Capital Agency And The Great mREIT Price Adjustment [View article]
    Hi crazty4tennis,

    Thanks for the comment, glad you enjoyed the article. As far as the dividend, there is no need to be concerned. Management can set the dividend at whatever they please and they certainly have the cash to do so. They made it clear they care a lot about maintaining the current significant dividend to shareholders and I don't believe there is a realistic scenario in which it is cut in the current environment. Their low taxable income really only matters for minimums not maximums (REIT rules require them to pay 95% of their taxable income in dividends before October of the following year) so my comment to the other reader on dividend outlook was because they are not being FORCED to raise it. I could always be wrong and they could decide to raise the payout, but it simply seems unlikely when they could simply grow their book value instead.
    Jul 30 12:55 AM | Likes Like |Link to Comment
  • American Capital Agency And The Great mREIT Price Adjustment [View article]
    Hi morpanalyst,

    Thanks for the comment, glad you enjoyed it.

    AGNC's dividend, while very likely to remain stable based on management guidance, won't be going up for a while. The reason was touched on briefly in the 'Interest Income' section, as they are holding a large balance of losses from 2013 to deduct against gains. This is highlighted in the 3rd bullet point of their release (http://bit.ly/1tnpQ1a;highlight=). Despite $1.16 in capital gains for the quarter, only .28 was realized as taxable income. They only have .04 or remaining undistributed taxable net income on the books and still $3.89 in losses to buffer this figure.
    Management has said keeping the .65 dividend consistent is important to them, and it is obviously more than feasible given their earnings profile so there should not be concerns over a decrease in payout. Despite the ability to support a higher dividend, I wouldn't expect them to consider a raise until some time after their loss balance is zeroed out- which likely won't be until sometime in 2015 (at earliest).
    Jul 29 10:50 AM | 1 Like Like |Link to Comment
  • American Capital Agency And The Great mREIT Price Adjustment [View article]
    Hi Scott,

    Thanks for the comment, glad you enjoyed the piece.

    Yes, the TBAs are included in the MBS calculations. Management aggregates the TBA position coupons with MBS in their disclosure, making it easy to map the coupons rather than estimate, and the calculations are the same since the position is long. Were AGNC net short, I would obviously have to try and branch them out, but in this case (and in most quarters for AGNC) there's enough detail to assess them together and simplify.

    And I agree, always happy to see others on the same page. I thought it was noteworthy that the actual numbers fell in the few cents of overlap (less than usual) we had in our projections. We both started writing on AGNC in the same quarter, so its a little bit of extra fun when both sets of analysis are validated and we draw the same conclusions.
    Jul 29 10:34 AM | 2 Likes Like |Link to Comment
  • American Capital Agency And The Great mREIT Price Adjustment [View article]
    Hi Darren,

    Great find- The basics of AI for any other investors reading:
    currently just over $500M in market cap
    $31.50 BV as of 3/31/14
    reporting July 29th after hours

    Their latest report said they held 2B in 30-years, and the average coupon on their 30-years was 4.06%, a bit higher than some of larger companies in that space so less benefit from this pricing change and higher CPR, but still obviously very nicely positioned at first glance and worth looking into in more detail. Thanks for the note!
    Jul 28 03:43 PM | 2 Likes Like |Link to Comment
  • American Capital Agency And The Great mREIT Price Adjustment [View article]
    Hi FinancialDave,

    The scope of these predictions in the mREIT sector are certainly different than most companies where a few cents per share of EPS makes a world of difference. Here are a few reasons why we feel it is very helpful.

    mREIT portfolios are constantly changing. If we had seen the exact same price movement 2 quarters ago when AGNC was still very overweight 15-years and heavy on swaptions, the range might be completed different (say between .50-1.25 in comprehensive income). A lot of investors seem to follow the value of the underlying securities, but not precisely enough to really discern anything beyond 'things are going up' versus 'things are going down'. Being able to present the range based on the granular breakdown provides some value to those investors, and gives them the ability to prepare for the results accordingly.

    Scenario analysis is also a valuable takeaway. As I tried to step through in the article, one of the conclusions is that even in our worst case scenario, AGNC is still undervalued on the market. That is, in principle, of much greater significance to readers than just saying 'we think AGNC really outperformed its peers this quarter' and not giving a confidence range of to what extent. Also, had we derived a larger range based on a great number of uncertainties and said 'AGNC is probably going to report great numbers but there is still a chance in our opinion that they report a book value of $25 and are actually overpriced' that can change the profile of action a reader might take since there is downside risk.

    Given the nature of the business and the fact that we have no transparency into what AGNC management did with their portfolio in the past 3 months, its not reasonable to say with high confidence that a particular figure is within a few cents of the truth, but there is still a great deal of value to understanding the rough magnitude of the portfolio movement ahead of time.
    Jul 28 02:18 PM | 2 Likes Like |Link to Comment
  • American Capital Agency And The Great mREIT Price Adjustment [View article]
    Hi Pablomike,

    Sorry this was a bit confusing, It was meant to say that the yield curve flattening in Q2 was a similar effect to what happened in Q1. The initial 'Q2' reference you quoted was a typo and should have said Q1. Hopefully that makes more sense, I have clarified the wording in the piece. Thanks for catching that.
    Jul 28 01:18 PM | 1 Like Like |Link to Comment
  • American Capital Agency And The Great mREIT Price Adjustment [View article]
    Hi abbythecat,

    Thanks for the comment, I'm happy you found it helpful.
    Jul 28 01:15 PM | 1 Like Like |Link to Comment
  • MannKind: Do Insider Sales Transactions Indicate This Is A Fool's Rally? [View article]
    As a side note - my near term stance on MNKD is actually in line with yours. I think they hit some major resistance around 11 and a lot of investors may not have the confidence the pricing will stay around where it is (hence why it is increasingly losing steam this week). There could be some very near term downside risk, but a few months from now after a potential approval and partnership agreement (as another comment pointed out) the price could stabilize at or above this level and I really don't see more than essentially a very short horizon trade taking advantage of the downside risk based on what we know today.
    Jun 12 02:57 PM | Likes Like |Link to Comment
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