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PR Newswire (Jan 23, 2014)
PR Newswire (Dec 4, 2013)
at MarketWatch.com (Aug 5, 2011)
at MarketWatch.com (Aug 4, 2011)
MTGE vs. ETF Alternatives
American Capital Mortgage Investment Corp. invests in and manages a leveraged portfolio of agency mortgage investments, non-agency mortgage investments and other mortgage-related investments, which it refers to as its target assets.
Wednesday, Dec 182013, 4:41 PM|Wednesday, Dec 182013, 4:41 PM| 2 Comments
Monday, Dec 162013, 3:35 PM
Monday, Dec 162013, 3:35 PM| 27 Comments
- The mortgage REIT sector (REM -0.6%) is lower on a bright green day for the rest of the market, with Anworth Mortgage's (ANH -1.2%) 33% dividend cut Friday night offering another excuse to Sell. Anworth is an agency mortgage player, investing mostly in adjustable mortgages. Anworth's new forward yield of 7.5% is so far out of line with the double digits of the rest of the industry, it suggests even more declines are in store for the stock, or big dividend cuts lie ahead for competitors. At $4.19, Anworth is selling for a near-30% discount to September 30 book value.
- Down the most today is American Capital Mortgage (AGNC -2.7%), and its non-agency cousin, American Capital Agency (MTGE -1.7%) is off sharply as well.
- Others: Annaly (NLY -1.3%), Armour (ARR -1.2%), Western Asset (WMC -1.8%), Apollo (AMTG -1.4%), Ellington (EFC -0.4%), (EARN +0.2%)
- Related ETFs: MORT, MORL
Tuesday, Dec 102013, 5:33 PM
Tuesday, Dec 102013, 5:33 PM| 3 Comments
- Rising interest rates have killed refinancing - eliminating prepayment risk - and home prices continue to move higher, a particularly bullish cocktail for non-agency MBS, says Gundlach (DBL, DSL), who finds those securities vastly more attractive than high-yield paper (HYG, JNK).
- Asked about Annaly (NLY) - an owner of agency MBS - Gundlach says he likes it and likes its management, but won't be buyer until after the dividend is cut to something more in line with what core earnings might be.
- "Something for Nothing" slides and webcast
- Non-agency MBS players include: MTGE, MFA, DX, TWO
- Related mREIT ETFs: REM, MORT, MORL
- High-yield ETFs: HYG, JNK, HYS, HYLD, SJNK, PHB, SJB, ANGL, XOVR, UJB, QLTC, SHYG
- Previous: "Freaking out" about interest rate risk
Wednesday, Dec 42013, 2:41 PM
Wednesday, Dec 42013, 2:41 PM| 1 Comment
- Talked about during its last earnings report in October, American Capital Mortgage (MTGE +0.5%) has purchased mortgage servicing company Residential Credit Solutions for an as-yet undisclosed amount.
- MSRs provide a new business line for MTGE, and also a natural hedge to the firm's ownership of long-duration mortgages as MSRs have negative duration - they go up in value as interest rates rise (cash flow is more stable as prepayments fall).
- Press release
Monday, Dec 22013, 3:48 PM
Monday, Dec 22013, 3:48 PM| 48 Comments
- There's no mercy for the mREIT sector (REM -1.6%) as this morning's strong economic data sends the 10-year Treasury yield five basis points higher to 2.80%. Among the new 52-week lows today are sector giants Annaly (NLY -1.6%) and American Capital Agency (AGNC -1.8%).
- Also down sharply are Armour (ARR -2.4%), CYS Investments (CYS -2.4%), Dynex (DX -2.5%), American Capital Mortgage (MTGE -2.8%), AG Mortgage (MITT -2.4%), and Arlington Asset (AI -3.1%).
- Management matters, and investors have clearly lost some faith in the leadership of Annaly and American Capital - both of which trade at more than 20% discounts to book value. The newest favorite is that of Ellington Financial (EFC), where management has mostly been able to preserve book value this year. Company structure may have helped too - Ellington is a partnership, not a REIT and has somewhat more flexibility with its portfolio. The stock trades at just a 6% discount to October 31 reported book.
- ETFs: MORT, MORL
Saturday, Nov 302013, 9:42 AM
Saturday, Nov 302013, 9:42 AM| 71 Comments
- "People are absolutely freaking out about interest-rate risk," says Jeff Gundlach, sitting down with Robert Shiller to size up the investment landscape. Ever the contrarian, Gundlach suggests last year's 1.4% low in the 10-year Treasury yield could still get taken out. The catalyst? "You never know until after the fact; otherwise, it would be priced in the market. But there is no inflation."
- The see "freaking out" in a picture, check out the price charts of the mortgage REITs, particularly the two proxies for riding the long end of the curve - Annaly (NLY) and American Capital Agency (AGNC). Gundlach: "You can take advantage of pockets of opportunity in what people don't want ... If you're willing to take the interest-rate [risk], you can get yields of 11% in the agency mortgage market."
- Constructive on housing (but not homebuilders), Gundlach is also bullish on non-agency mortgage paper, calling it the cheapest sector in fixed income on a risk-adjusted basis. Fans of also beaten-up non-agency mREITs like American Capital Mortgage (MTGE), MFA Financial, Dynex (DX), and Two Harbors (TWO) may want to take notice.
- Mortgage REIT ETFs: REM, MORT, MORL
- Long-duration Treasury ETFs: TBT, TLT, TMV, TBF, EDV, TTT, TMF, TLH, ZROZ, SBND, DLBS, VGLT, UBT, TLO, LBND, TENZ, TYBS, DLBL
Friday, Nov 222013, 3:11 PM
Friday, Nov 222013, 3:11 PM| 12 Comments
- A nice backup in rates (the 10-year Treasury yield is off 4 bps to 2.75%) is of no help to the mortgage REITs (REM -0.3%), with sector kingpins Annaly (NLY -1.4%) and American Capital Agency (AGNC -1.2%) both hunkered down (NLY earnings call, AGNC earnings call) for the Fed taper, and both hitting 52-week lows today.
- Earlier this week, AGNC and MTGE CIO Gary Kain took his case all the way to Asia at the Citi financial services conference in Hong Kong (transcript). Yes, book value has been hit by higher rates, but also by how much the market is willing to pay for it. Whereas AGNC traded at an average of 110%-120% of book over the past 4-5 years, it's now at sub-90%.
- Discounts can last for awhile, he admits, but also reminds this isn't some opaque bank balance sheet, but instead an easily valued, highly liquid portfolio of assets trading at $0.85-$0.90 on the dollar. As long as it persists, American Capital will continue selling MBS for $1 and buying back stock at a discount.
- Previous: Kain makes a similar case
- Related ETFs: MORT, MORL
- Other sector stocks: Armour (ARR), Two Harbors (TWO -0.8%), CYS (CYS +0.1%), AG Mortgage (MITT -0.5%)
Thursday, Nov 142013, 8:36 AM
Thursday, Nov 142013, 8:36 AM| 11 Comments
- Gary Kain's co-chief investment officer at American Capital Mortgage (MTGE) - Jeff Winkler - has resigned from the company, effective yesterday.
- The entire mREIT (REM) industry has struggled this year, particularly MTGE and cousin American Capital Agency (AGNC), which - for the moment - have given up the management premiums they used to enjoy.
- SEC Form 8-K
Wednesday, Nov 132013, 3:57 PM
Wednesday, Nov 132013, 3:57 PM| 9 Comments
- When agency mREITs trade at discounts to book value, it's a lot different than a bank or insurance company trading at a discount, says American Capital Agency (AGNC +1.6%) CIO Gary Kain, speaking at the BofA financial services conference (transcript) (slides). Why? Because the assets held at an agency REIT are fairly easy to mark, and they're easy/liquid to trade. The benefit of selling mortgages and buying back stock is pretty clear.
- "We stressed on our call that we ... clearly believe that we should be buying back stock in an environment such as this and taking advantage of the liquidity of our assets ... We will continue to pay a lot of attention to the ability to monetize price to book discount," not just at AGNC, but at American Capital Mortgage (MTGE +0.5%).
Friday, Nov 82013, 9:51 AM
Friday, Nov 82013, 9:51 AM| 8 Comments
- Sharply higher interest rates has a number of mREITs (REM -2.4%) hitting new 52-week lows. Most of the stocks were already on the defensive over the past few sessions following near-universally disappointing Q3 results.
- Annaly (NLY -3.3%), American Capital (AGNC -2.9%), (MTGE -2.5%), Armour (ARR -3.7%), Invesco (IVR -3%), CYS Investments (CYS -5.3%), Hatteras (HTS -3%).
- Other related ETFs: MORT, MORL.
- Earlier: Big beat on jobs number sends Treasury prices south.
Thursday, Oct 312013, 11:40 AM
Thursday, Oct 312013, 11:40 AM| Comment!
- The company has agreed to buy a mortgage servicing firm as it tries to get into the business of buying up the MSRs being offloaded by many banks. CIO Kain tries to keep expectations in hand, noting the massive bank MSR sales most have been expecting have yet to materialize. Kain reminds MSRs have negative duration - their value increases as rates go higher - meaning American Capital (MTGE -1.3%) can reduce hedges as it picks up servicing assets.
- Why buy MSRs instead of just adding I/O assets (which also have negative duration), asks a conference call participant. I/O's are generally far more expensive, replies Kain, as anybody can buy the paper, but barriers to entry in the MSR space are far higher. Also, the supply of I/Os is far more limited than that of MSRs.
- Q3 results.
- Presentation slides.
Wednesday, Oct 302013, 4:21 PM
Wednesday, Oct 302013, 4:21 PM| Comment!
- Book value of $22.37 per share is off 1.1% from $22.63 at the end of Q2 and compares to today's close of $19.42, putting the shares at a 13.2% discount.
- Net interest spread of 1.77% is off 17 basis points from 1.94% in Q2.
- $7.7B portfolio down from $8.8B at end of Q2. 5.7x "at risk" leverage vs. 6.4x at end of Q2. Agency securities of $8.4B, $900M non-agency, and $1.6B net short TBA mortgage position.
- 3.2M shares repurchased - 5.7% of the float - at average price of $19.58 each. Compares to 2.9M shares repurchased at average of $21.34 in Q2.
- CIO Gary Kain: "The non-agency market can be characterized by light supply and continued improvement in prices. On the agency side, consistent with our market outlook, we further repositioned the portfolio away from 30-year MBS and into more 15-year securities and ARMs."
- Conference call tomorrow at 11ET.
- Press release.
- MTGE +0.8% AH.
Wednesday, Oct 302013, 4:03 PM|Wednesday, Oct 302013, 4:03 PM| 3 Comments
Tuesday, Oct 292013, 9:20 AM
Tuesday, Oct 292013, 9:20 AM| 3 Comments
- The first post-earnings downgrade for American Capital Agency (AGNC) comes from BAML, which removes its Buy rating. The quick take from the company's results (reported last night) shows CIO Gary Kain lightening up the portfolio and shortening duration just as the bond market was set to reverse course and move sharply higher. Today's 11 ET conference call should prove a worthy listen. AGNC -4.7% premarket.
- Armour Residential results show pretty much the same thing, with the book dropping to $16.7B from $22.6B a quarter earlier. ARR -4.1%.
- Other agency players premarket: Annaly (NLY) -1.9%, CYS Investments (CYS) -0.8%.
- Kain's non-agency vehicle: American Capital Mortgage (MTGE) -4.3%.
- ETFs: REM -0.6%. Also: MORT, MORL.
Tuesday, Oct 82013, 12:09 PM
Tuesday, Oct 82013, 12:09 PM| 4 Comments
- 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.
Tuesday, Sep 242013, 2:45 PM
Tuesday, Sep 242013, 2:45 PM| 16 Comments
- 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.
- View all 10 replies
William Packer:: Short 2 contracts @ 123'060 on 10s.. I think data next week pushes us deeper into 3s.
William Packer:: i dont know now. the data looks like the bar was set pretty high at least for monday. so monday might be weaker than expected.
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William Packer:: yeah.. what about them?
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Cash King:: some of my other underweight holdings.
Defenster:: I own them all but not the common, I have the preferred. Own the common in REM. Can't cit the dividend and PFD is senior to common.
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Perkins Cove:: Unless of course you own Packer stock?
William Packer:: About a $2.90 spread between the two company's book values... MTGE and AGNC... as of Q3.. yet the spread between the stocks is only $1.50.
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William Packer:: capital to manage.. thus more management fees.. and get stock price up to do offerings. all about making themselves $
dindin21:: The stock price is 30% to book! How much more could it possibly fluctuate.....
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William Packer:: Darren, book values are different as of Q3 end.. but non-agencies are up significantly from Q3 end.. and MTGE has an MSR servicer now.
William Packer:: So book could be within $1 of each other for all we know.. but we know non-agency has done very well. see XDMOX.
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Aikman:: Well I was thinking the same thing. I will add a small MTGE position.
Cash King:: I agree completely.