Jul. 29, 2014, 3:39 PM
- "We think it is reasonable to extend duration in an environment where extension risk is priced into the market, and that is what we believe American Capital Agency (AGNC -0.6%) is doing with its current asset selection," says Wunderlich's Merrill Ross, upgrading the stock to a Buy and lifting the price target by $3 to $26.50.
- He notes price discovery in agency MBS amid the QE taper has been far less complicated than expected. Dividends should continue to be well covered by core earnings and AGNC (along with much of the sector) continues to trade at a sizable discount to book value.
- Previously: American Capital +1.3% after reporting a big Q2
- Previously: Notes from American Capital earnings call
Jul. 29, 2014, 11:35 AM
- Finding valuations somewhat "stretched" in 15-year mortgages, American Capital (AGNC +0.1%) CIO Gary Kain takes holdings of that paper down to 38% of the total portfolio as of the end of Q2, from 48% at the end of Q1. The money goes into 30-year mortgages, with that allocation rising to 57% from 46%.
- Webcast and presentation slides
- Looking ahead, management continues to see agency MBS as looking more attractive than other fixed income products, noting continue sharp tightening in investment grade corporate paper spreads while mortgage spreads have increased over the last two years - this despite superior liquidity and financing in mortgages.
- Liking what it sees in last night's earnings report, Wunderlich upgrades the stock to a Buy.
- Previously: American Capital +1.3% after reporting a big Q2
Jul. 28, 2014, 4:16 PM
- Net spread and dollar roll income of $0.87 per share compares $0.71 in Q1, and to the $0.65 dividend.
- Book value per share of $26.26 up 7.2% from June 30 book value of $24.49. Today's close of $23.69 is a 9.8% discount to book. Dividend plus boost in book value translates to 9.9% economic ROE for Q2.
- CPR of 9% up 200 basis points from Q1.
- Net interest spread of 1.84% up 25 basis points from Q1.
- Average "at risk" leverage of 7.1x vs. 7.2x in Q1.
- CIO Kain takes a victory lap: "Our results this quarter were bolstered by several important strategic decisions ... Most important was our decision to maintain our leverage as we believed the supply and demand outlook for agency MBS was very positive despite the tapering of Fed purchases."
- Conference call tomorrow at 11 ET
- AGNC +1.3% AH
- Previously: American Capital Agency beats by $0.19
Jul. 28, 2014, 4:05 PM
Jul. 27, 2014, 5:35 PM
Jul. 17, 2014, 7:09 AM
- American Capital Agency (NASDAQ:AGNC) and American Capital Mortgage (NASDAQ:MTGE) as of yesterday disclose a 4.53% stake in Hatteras Financial (NYSE:HTS) vs. their combined 8.5% stake from late January.
- AGNC and MTGE CIO Gary Kain - late last year and early this year noting the absurdity of large swaths of the mREIT industry trading at sizable discounts to book value - was an aggressive buyer of his own stock and that of other mortgage REITs (though Hatteras was the only publicly disclosed purchase).
- Not including sizable dividends, Hatteras has returned about 20% YTD, as has American Capital Agency. American Capital Mortgage is up about 12.5%.
Jul. 10, 2014, 10:17 AM
- Working today as both stock and bond yields fall in response to banking troubles in Portugal are both equity and mortgage REIT names.
- Leading in the mortgage REIT sector are Annaly (NLY +0.8%) and American Capital Agency (AGNC +0.8%), and a sampling of equity REIT names: Realty Income (O +0.6%), Omega Healthcare (OHI +1%), Ventas (VTR +1.2%), Medical Properties (MPW +1%), Avalon Bay (AVB +0.5%), Simon Property (SPG +0.8%), Boston Properties (BXP +0.8%)
- ETFs: IYR, VNQ, DRN, URE, SRS, ICF, RWR, SCHH, DRV, KBWY, REK, FRI, FTY, PSR, FNIO, WREI, REM, MORL, MORT
Jul. 3, 2014, 9:56 AM
- A few days ago, the 10-year Treasury yield stood at about 2.50%, but it's been on the rise all week and shot up to near 2.7% this morning following the strong jobs print and drop in unemployment to 6.1%. Checking the short end of the curve, Eurodollar futures are selling off as well, and now have baked in more than one rate hike between now and one year from now, and 75 basis points of hikes by the end of 2015.
- Previously: Treasury yields jump, gold slumps after strong jobs print
- Off 1.1% today, Annaly Capital (NLY) is down nearly 5% since this time last week, with a similar move having taken place in American Capital Agency (AGNC -1.2%).
- Chimera (CIM -1.4%), CYS Investments (CYS -1%), Invesco Mortgage (IVR -1.8%), American Capital Mortgage (MTGE -1.6%), New York Mortgage Trust (NYMT -1.2%), AG Mortgage (MITT -1.8%), Ellington Residential (EARN -0.7%), Dynex (DX -0.8%), MFA Financial (MFA -0.9%).
- ETFs: REM, MORT, MORL
Jun. 26, 2014, 3:54 PM
- Enjoying the decline in interest rates even among some hawkish stomping of feet by St. Louis Fed boss Jim Bullard, the mortgage REIT sector (REM +0.9%) is broadly higher. Sector giants: Annaly Capital (NLY +0.6%) and American Capital Agency (AGNC +1.1%).
- Others: Two Harbors (TWO +1.9%), Chimera (CIM +1.8%), American Capital Mortgage (MTGE +1%), Cherry Hill Mortgage (CHMI +1.4%), New York Mortgage Trust (NYMT +1.1%).
- Other ETFs: MORT, MORL
Jun. 17, 2014, 4:14 PM
May 28, 2014, 2:43 PM
- The swoosh down in interest rates - the 10-year Treasury yield is now off 8 bps on the session to just 2.44% - isn't really boosting the mREIT sector (REM -0.1%), and one wonders which managements hunkered down for higher rates and now find themselves overhedged. There's also a flattening yield curve and it wasn't too long ago when the bear case on mortgage REITs was slimming net interest margin, not higher rates.
- Kudos to CYS Investment (CYS +0.5%) management, which - not finding a ton of value in mortgages - loaded up on Treasurys in Q1. The stock is one of the sector's stronger performers YTD, up 24.5%.
- Others today: Annaly (NLY +0.1%), American Capital (AGNC -0.7%), Armour Residential (ARR +0.7%), Hatteras Financial (HTS -0.3%), Capstead Mortgage (CMO -0.2%), Western Asset Mortgage (WMC -0.6%)
- ETFs: MORT, MORL
May 21, 2014, 9:39 AM
- A notable new position disclosed in Greenlight Capital's recently released 13F is a more than 5M share stake in American Capital Agency (AGNC).
- It was two years ago this month when Einhorn called the mortgage REIT sector - then trading at a premium to book value - a short, noting yield-desperate Japanese investors were beginning to pull money out. The sector peaked about 3 months later, and bottomed out around the end of 2013.
- Related ETFs: REM, MORT, MORL
Apr. 29, 2014, 11:33 AM
- It's hard to get worked up about the taper upsetting the supply/demand picture in MBS this year, says American Capital Agency (AGNC -0.9%) CIO Gary Kain on the earnings call. Thanks to the slow pace of mortgage originations this year, 2014 will likely have the smallest pace of net MBS supply (gross supply minus Fed purchases) of any year this century (excepting the 2009 blowup). See presentation slides, page 12.
- Given these dynamics, says Kain, it's hard to make the argument that mortgages are overpriced at the moment.
- Previously: CYS Investment's Kevin Grant says mortgages are too pricey and awaits a pullback.
- Next, Kain looks (page 13) at the changing investor base for MBS as the Fed has become the gorilla. Who's been selling? Everyone, but it's mostly money managers who have cut back while the Fed fattened up its holdings. As for mortgage REITs, they've not only cut back their holdings (account for less than 5% of the market), but they've reduced leverage too.
- Previously: American Capital beats estimates; grows book value
Apr. 28, 2014, 4:15 PM
- Economic net income of $1.18 per share, with $0.71 net spread and dollar roll income vs. expectations of $0.68. Q1 dividend was $0.65.
- Book value per share of $24.49 after $0.65 dividend is up from $23.93 at the end of last year.
- Size of agency MBS portfolio is $70.5B, up from $68.2B at the end of last year. $352M invested in other mortgage REITs - produced $49M, or $0.14 per share gain from dividends and appreciation during Q.
- 7.6x "at risk" leverage as of the March 31 vs. 7.5x at end of 2013.
- Portfolio CPR of 7% down from 8% a quarter ago. Adjusted net interest spread of 1.59% is up 17 basis points.
- 3.4M shares repurchased - 1% of the float - during quarter at average price of $22.10. Since the end of 2012, company has repurchased 46.3M shares, or 12% of the float.
- CIO Kain: "We remain optimistic ... To this point, April has been a very good month."
- CC tomorrow at 11 ET
- Previously: American Capital Agency Corp. EPS of -$0.41
- Source: Press Release
- AGNC flat AH
Apr. 28, 2014, 4:03 PM
Apr. 27, 2014, 5:35 PM
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