Seeking Alpha

American Capital Agency Corp. (AGNC)

  • Oct. 28, 2013, 12:10 AM
  • Oct. 27, 2013, 5:35 PM
  • Oct. 22, 2013, 12:50 PM
    • Throwing a small party in wake of the slow jobs number and resultant tumble in interest rates is the mREIT sector (REM +1.5%). The stocks were mercilessly punished all late spring and summer as interest rates rose, but have regained their footing since about September. The 10-year Treasury yield is at a 3-month low of 2.53%.
    • Sector giants American Capital (AGNC +2%) and Annaly (NLY +1.5%) are now up about 15% from their 52-week lows set a couple of months ago.
    • Sector fans will recall the stocks getting hit late in 2012 over fears rates - rate spreads, actually - were too low for the companies to earn any return on. With the taper off the table, will those worries return? Tough business.
    • Other big movers today: Invesco (IVR +2.6%), Hatteras (HTS +2.9%), CYS (CYS +2.8%), Anworth (ANH +4.7%), New York Mortgage (NYMT +1.5%), Western Asset (WMC +1.1%).
    • Other ETFs: MORT, MORL.
  • Oct. 9, 2013, 9:16 AM
    • The IMF finds another corner of the universe into which to insert its expertise, now opining that mortgage REITs (REM) pose systemic risk and calling for boosted regulation of the sector.
    • The agency worries (as have others) about a cycle of rising rates forcing repo market disruptions, forcing MBS sales, forcing even higher rates, and crunching the recovering housing market. The IMF wants tighter oversight of not just the REITs, but of their financiers in the repo market.
    • Regulators might even consider designating the largest of the mREITs as systemically important and thus subject to even more oversight, says the IMF, sending a shiver through the sector giants Annaly (NLY) and American Capital (AGNC).
    • Related ETFs: MORT, MORL.
  • Oct. 8, 2013, 12:09 PM
    • Total economic return for mREITs (REM -0.9%) should be positive over the next year, says Credit Suisse, with hybrid/non-agency names faring better than their agency MBS cousins thanks to an expected continued rise in long-term interest rates.
    • The team continues to favor two names with less interest rate risk - Two Harbors (TWO -0.8%) and Ellington Financial (EFC -0.4%), as well as those lumped in with mREITs but not really so - Newcastle Investment (NCT -1%), New Residential (NRZ -0.6%), and PennyMac Mortgage (PMT -1.4%).
    • Management willingness to buy back shares trading below book value coupled with an ability to protect book value will be the "differentiator of valuation within the group," says Credit Suisse, noting the aggressive repurchases of Gary Kain's AGNC and MTGE.
    • Related ETFs: MORT, MORL.
  • Sep. 26, 2013, 7:54 AM
    • JPMorgan initiates coverage on two mREITs, starting Two Harbors (TWO) at a Buy with $10.50 price target and American Capital Agency (AGNC) at Hold with $22 price target.
    • Two Harbors, of course, invests in a wider variety of assets and has a good deal of exposure to credit, rather than rates. American Capital, on the other hand, is strictly an agency MBS player.
    • AGNC is off 2.5% premarket, but it's just one trade for 102 shares.
  • Sep. 24, 2013, 2:45 PM
    • The mREIT (REM -0.5%) environment has turned favorable, says Maxim's Michael Diana, but non-agency players are his favorites due to less leverage and exposure to higher home prices. His favorite picks:
    • Ellington Financial (EFC +1.2%) - a non-REIT which gives it "the ability to hedge and trade on an unrestricted basis [and profit from] volatility." His target price is $28 (Ellington Residential EARN is the REIT version).
    • Two Harbors (TWO -0.3%) - “due to substantial non-Agency and hedging expertise, as well as diversification.” The price target is $11.50.
    • American Capital Mortgage (MTGE +1.2%) - price target $25.
    • Eleven mREITs have cut their dividends this quarter, but pricing below book value still leaves yields high - 13.9% average for agency REITs, and 13.1% for hybrids.
    • Other buy-rated mREITs at Maxim: AMTG, DX, AGNC. Hold-rated: MITT, ARR, HTS, JMI.
    • Related ETFs: MORT, MORL.
  • Sep. 20, 2013, 10:22 AM
    • The mREIT (REM -1.7%) stocks sink under another wave of hefty dividend cuts overnight, with the sector gorillas Annaly (NLY -2.6%) and American Capital (AGNC -3%) slashing their payouts by 12.5% and 24% respectively. American Capital however, continues buying back its shares at a discount to book value at a fast pace.
    • American Capital's non-agency cousin, American Capital Mortgage (MTGE -1.2%) cut its dividend 12.5%, and also continues to retire stock below book value. Western Asset Mortgage (WMC +0.7%) held the line on its dividend.
    • Other movers include: Chimera (CIM -1.3%), Hatteras (HTS -1.9%), Capstead (CMO -2.2%), Javelin (JMI -3.3%).
    • Relevant ETFs: MORT, MORL.
  • Sep. 19, 2013, 5:42 PM
    • American Capital Agency (AGNC) cuts its dividend by $0.25 to $0.80 per share. Annualized, it's a 13.5% yield based on today's close of $23.79.
    • The company also announces it's repurchased 11.9M shares thus far in Q3 - about 3% of the float - at an average price of $22.16.
    • Is the dividend cut more than priced in? Share are up marginally AH.
    • Press release.
  • Sep. 19, 2013, 10:24 AM

  • Sep. 18, 2013, 2:29 PM
    • Most stocks are partying in wake of the Fed not commencing its QE taper today, but one sector of note is the beaten down mortgage REIT (REM +2.8%) group.
    • Annaly (NLY +3.2%), American Capital (AGNC +3.5%), (MTGE +2.4%), Armour (ARR +3.4%), Two Harbors (TWO +3.4%), CYS Investments (CYS +3.7%), Anworth (ANH +2.8%), Western Asset (WMC +2.2%), Javelin (JMI +2%), AG Mortgage (MITT +2.1%), Arlington Asset (AI +1.6%).
    • Yesterday, KBW called out CYS Investments as one of the more aggressive plays for those believing rates might head lower.
    • ETFs of note: MORT, MORL.
  • Sep. 17, 2013, 11:58 AM
    • Remaining positive on mREITs (REM) as Summers' withdrawal reduces the chance of a continued sharp move higher in rates, KBW has 3 picks for a flattening yield curve.
    • For an aggressive play, try CYS Investments, trading at an estimated 85% of book value, and among the more rate-sensitive of the sector thanks to its relatively high duration gap and leverage.
    • More conservative picks would be Gary Kain's two vehicles, American Capital Agency (AGNC) and American Capital Mortgage (MTGE), both trading at about 91% of book, but better-hedged against higher rates.
    • Related ETFs: MORT, MORL.
  • Sep. 16, 2013, 1:32 PM
    • "The stock prices do not fully reflect the risks to the agency mortgage REIT model," writes Sandler O'Neill in its downgrade of American Capital (AGNC -1.2%) and Armour Residential (ARR +0.4%). The risks:
    • Price volatility in MBS, the overhang of what the Fed might do with $1.3T of MBS on its balance sheet, other MBS owners could become sellers - namely mutual funds and other mREITs, retail skittishness could widen discounts to book value even further, and the transition to a new Fed chairman.
    • While not cutting earnings estimates, Sandler does cut AGNC's price target to $21 from $25, and ARR's to $3.50 from $4.50.
    • The average book value/share of agency mREITs fell 4.5% in Q1, 14.7% in Q2, and "we don't think all the volatility is behind us." Book value could fall another 10-25% if some of the above risk factors play out. Additionally, Sandler expects the agency mREITs to trade at a 10-20% discount to book as long as the overhang of the Fed being a seller remains.
    • Earlier: The downgrade and Compass One's differing opinion.
    • Related ETFs: REM, MORT, MORL.
  • Sep. 16, 2013, 12:56 PM
    • The Summers withdrawal and resultant bond market rally had the mREITs (REM +0.7%) opening sharply higher, but the rally is fading, with sector giants Annaly (NLY -0.5%) and American Capital (AGNC -0.3%) now in the red.
    • American Capital is the subject of a downgrade to to Sell from Hold at Sandler O'Neill. Sandler cut another pure-agency player, Armour Residential, to Sell as well.
    • Compass Point - on the other hand - raised a number of non-agency mREITs to Buy (or initiated them at that level), and upgraded Armour to Buy as well.
    • Related ETFs: MORT, MORL.
  • Sep. 16, 2013, 8:48 AM
    • Compass Point upgrades Western Asset Mortgage (WMC) to Buy with $17.50 price target.
    • Shares +2.5% premarket, but it's likely more about Summers withdrawing from the Fed chairman's race. NLY, AGNC, ARR, IVR, and TWO are all up more than 2% in early action.
    • Earlier: Compass point initiates coverage on several non-agency mREIT names, starting them all at Buy.
    • Related ETFs: REM, MORT, MORL.
  • Sep. 11, 2013, 10:30 AM
    • Trading at about 10% discounts to book, Gundlach thinks the mREITs (REM +0.2%) offer value, but he doesn't expect much price appreciation in the near-term. His favorites are the agency players as he believes they'll outperform over an entire cycle.
    • He mentions Annaly (NLY +0.9%) specifically as a both a well-run mREIT and a good proxy for the entire sector. Even should the annual dividend drop to $1 (vs. $1.60 now), it's still near a 9% yield, he says.
    • Last night's webcast.
    • Late August: Gundlach turns bullish on mREITs
    • Other ETFs: MORT, MORL.
    • Other agency players: AGNC, ARR, HTS, CYS, CMO.
Visit Seeking Alpha's
AGNC vs. ETF Alternatives
Company Description
American Capital Agency Corp is a real estate investment trust that invests exclusively in residential mortgage pass-through securities and collateralized mortgage obligations on a leveraged basis.
Sector: Financial
Country: United States