American Capital upgraded at JPM, book value erosion nearly finished


American Capital's (AGNC +1.7%) book value has fallen about as far as it should, its net interest margin has "troughed,” and its book “remains well insulated against higher rates," J.P. Morgan analysts say in upgrading shares to Overweight and raising its price target to $22 from $20.

From peak book value of $32.49 at Q3 2012, JPM predicted a 32% decline in BV by Q4 2014; as of Q4 2013, book value had declined 26%, so the firm thinks most book value erosion is finished.

The firm raises its Q4 2014 book value estimate to $22.21 from $20.92 based on the YTD rally in MBS prices, and lifts its 2014 dividend forecast to $2.60 from $2.20, amounting to a total annualized return of ~15.3%.

Comments (9)
  • Ron Reed
    , contributor
    Comments (345) | Send Message
     
    A little late to the party.
    5 Feb 2014, 03:13 PM Reply Like
  • chopchop0
    , contributor
    Comments (5066) | Send Message
     
    yup. they should have been buying $20
    5 Feb 2014, 03:21 PM Reply Like
  • tstreet
    , contributor
    Comments (1034) | Send Message
     
    Well, at least there is finally a bit of a party. Can't complain about 2014 so far.
    5 Feb 2014, 04:19 PM Reply Like
  • Doyle3000
    , contributor
    Comments (1922) | Send Message
     
    Hey it's nice to read good news on mREITS. I'll take it. And glad I held my positions.
    5 Feb 2014, 03:36 PM Reply Like
  • RoberHD05
    , contributor
    Comments (101) | Send Message
     
    I have hung in long enough to bring my Break Even price down to under $17, so now I can enjoy some steady dividends without worrying so much about the share price.
    Long for the long haul.
    5 Feb 2014, 04:04 PM Reply Like
  • Ron Reed
    , contributor
    Comments (345) | Send Message
     
    Like most of us, I don't pay attention to the 'analysts' they are often wrong and there is no incentive for them to be right. Much like newspapers, big story on page one, the apology is in 8pt text on page 10 below the full page ad.

     

    I do find it comical when they give us 'big' news 2-3 weeks after we've all hashed it all out.
    5 Feb 2014, 04:28 PM Reply Like
  • Pablomike
    , contributor
    Comments (4396) | Send Message
     
    Isn't wasn't that long ago they downgraded the stock......after it had dropped by $18 a share. Thanks JPM
    5 Feb 2014, 06:30 PM Reply Like
  • thales23
    , contributor
    Comments (11) | Send Message
     
    Now I'm worried
    5 Feb 2014, 09:13 PM Reply Like
  • newsagg
    , contributor
    Comments (23) | Send Message
     
    I don't trust analysts either but it's data I can't ignore. I use TipRanks and if the analyst is under a 3 star I ignore the call.
    5 Feb 2014, 09:17 PM Reply Like
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