AT&T (T -5.4%) gets slammed as 3 downgrades arrive in response to its Q1 revenue miss, the result of soft wireless subscriber adds and declining wireline revenue. There might also be concerns about whether lowering 2014/2015 capex targets (to fuel more buybacks?) is a bright idea in light of flagging growth. AT&T's 296K Q1 postpaid net adds (boosted by tablets) and 184K prepaid net losses are easily worse than Verizon's respective net adds of 677K and 43K. On the earnings call, AT&T mostly blamed wireline weakness on macro and government issues, rather than legacy voice service declines. VZ -1.9%. CTL -4%. WIN -2.2%. FTR -1.1%. [View news story]
These downgrades almost always provide great buying opportunities. I've wanted to add to my T position, but I've been waiting for a market selloff. Not waiting any longer.
A check of mortgage REITs as the Fed looks to continue banging away at their net interest spread: Among the pure-agency REITs, HTS, which slashed its dividend last night, -2.3%. Also, AGNC -1.2%, but NLY +0.8%. The non-agency players mostly fare better, DX -0.1%, IVR -0.3%, EFC -0.1%. [View news story]
I agree, Pablomike. The only issue here is that between quarters, you don't know exactly what securities they're holding and what there value is. We only learn that quarterly.
A check of mortgage REITs as the Fed looks to continue banging away at their net interest spread: Among the pure-agency REITs, HTS, which slashed its dividend last night, -2.3%. Also, AGNC -1.2%, but NLY +0.8%. The non-agency players mostly fare better, DX -0.1%, IVR -0.3%, EFC -0.1%. [View news story]
Pablomike mReits are, indeed, traded every day, but net book value (and spread) is only made available to the public by each company once every quarter.
A check of mortgage REITs as the Fed looks to continue banging away at their net interest spread: Among the pure-agency REITs, HTS, which slashed its dividend last night, -2.3%. Also, AGNC -1.2%, but NLY +0.8%. The non-agency players mostly fare better, DX -0.1%, IVR -0.3%, EFC -0.1%. [View news story]
Re being one quarter behind in book value: AGNC's book value, on average, mostly bracketed around the 5% premium range. So, normally, book value was not something that one needed to be that concerned about, since it was almost always the same. It's only been "aberrant" since late September, when it spiked up to an 18% premium that BV became a concern to me. Up until then, my answer to you as to whether one is always a quarter behind would have been "no", since it was almost always about the same. At that point, I was able to look into a rear view mirror, see that the premium was way above normal, and decide to sell. My crystal ball, however, is not nearly as effective as my rear view mirror, and we'll have to see if book values for some of these mReits stabilize again for a reasonable period of time. At this point, however, there are so many moving parts involved in determining the valuation of this group, that there are going to be many more things impacting the group than as been the case for the last couple of years. They are, among others, the wide swings in BV, the decreasing spreads (at least for now, but maybe that trend is now stable), the repayment rate, which has been excellent, on balance, for AGNC, the Fed's ongoing purchases of agency paper, and the dividend tax issue, which does not really apply to mReits, but the pubic perception is that a dividend is a dividend, even though distributions from mReits are actually quite different. Hope this helps.
A check of mortgage REITs as the Fed looks to continue banging away at their net interest spread: Among the pure-agency REITs, HTS, which slashed its dividend last night, -2.3%. Also, AGNC -1.2%, but NLY +0.8%. The non-agency players mostly fare better, DX -0.1%, IVR -0.3%, EFC -0.1%. [View news story]
ka12345-
There are 2 unknowns right now - the 2 most important for making mReit investment decisions. At this point, we only know what the book value and the spreads were for the 3rd quarter. I sold all of my AGNC when the premium to book value rose to 18%, and I felt that was not sustainable. Many on this thread disagreed, but it was not, in fact, sustainable, and it's now selling below 3rd quarter book value. Right now, there is no "current" book value available to investors - we'll have to wait until January or possibly early February, when AGNC and others announce book and spreads. So, for now, we don't know if AGNC (and others) is selling at book, below book, or above book. As of today, AGNC looks like a bargain, since it's selling below 3rd quarter book. But, book might have declined since, and it could actually be selling above book. Again, the other unknown is what the spreads have done since Q3, and my bet is that they're lower. To the point, I'm waiting for more information before I jump back in, although as it declines, I might begin to build a position, but no more than 5% at a time.
Beaten Down American Capital Agency Corp. Is A Buy With Its 16.43% Dividend [View article]
Thanks for that, David. I agree that the stock has typically sold above BV. I took a look at the history of price/BV a couple of months ago. The premium had averaged around 5%, but it was trading at a premium of around 15%-18% at that time. I felt that this premium was unsustainable, and I sold all of my mReits at that time. I think that the problem now is that with all of the drama in this market, nobody really knows (a) what the spread is likely to be over the next couple of quarters, and (b) nobody knows what the BV will be. That has always been true, but one could at least reasonably project a trend. So, too many unknowns, and as always, neither the broader market nor we mReit holders (or ex holders in my case) like this much uncertainty. The distributions on many of the most popular mReits don't happen until January anyway, so for me, there's no hurry to jump back in until we have a modicum of clarity.
Beaten Down American Capital Agency Corp. Is A Buy With Its 16.43% Dividend [View article]
I'm having a hard time understanding how the increase in book value has added to the investment value of AGNC. Like most other investments, the basis is the return. In the case of AGNC, with the squeeze on spreads and the decrease in leverage, I can't imagine that the dividend is not going to be cut. At the very least, it is certainly suspect, so purchasing the stock at this point becomes speculation rather than a solid investment play. Book value, shmook value - if it doesn't result in an increase in the price of the stock or an increase in return, it's academic.
Liquidation in mortgage REITs picks up where it left off on Friday, with nearly the entire sector lit up bright red. Leading today's decline is CYS Investments (CYS -4.6%) after being cut to hold at Wunderlich. No details are available, but presumably the analysts there read the papers: interest margins are declining and mortgage refinance activity (prepays) is on the rise. [View news story]
Thomas Flaherty (see above) got it right. While it's true that even if the distribution of a stock such as AGNC goes from, say, 15% to 10%, it's still a terrific return in comparison with most alternatives, the market is not going to pay the same for a reliable 10% return as they will for a reliable 15% return. So, although you still have a superior return, you will have suffered a potentially significant hit to the value of your asset. AGNC and MTGE are still priced at a historically high price/book, which might be appropriate in an environment where book value is increasing (which it might or might not) and the dividend is safe (which it's probably not), but that's certainly not the case at this point in time. Both AGNC and MTGE normally sell for around a 5% premium to book, so they still have some room left underneath the current prices. The fact that we do not even know the Q3 book value makes simply adds to the speculative nature of holding either stock at these levels. It puts holding or buying these stocks into the "gambling" category. If book goes up, you win. If book stays the same or retreats, you lose. One would think that because of the Fed's buying spree, book would go up because the value of the paper would go up, but if these company's have increased their leverage, it could minimize that gain or eliminate it altogether.
Mortgage REITs continue to get repriced for lower yields going forward with earnings reports from JPMorgan and Wells Fargo not bringing good news. Both banks reported sliding net interest margins and booming mortgage business (some, if not most of which is refinancing) - an ugly combination for leveraged owners of MBS. [View news story]
While the comments about continuing to own MReits due to their superior yield makes sense, why hold onto the ones that are selling at historically unsustainable price/book ratios, such as AGNC? Wouldn't one be better off waiting for these names to reprice and then move back in? When distributions are lowered, you'll have a much higher yield if you buy in at the more sustainable value than if you simply hang onto your current holdings, likely bought at the inflated price/book values. My guess is that AGNC will drop into a range that reflects a price/book of between zero and 5%. What's unknown at this point, of course, is "what is the current book value?" I would think that it's increased, but even if you factor that in, AGNC still has a couple of points to lose.
"Our goose is cooked," writes a mortgage trader, imagining a conversation at the trading desk of a pure GSE mREIT like Annaly (NLY). With MBS prices bid to all-time highs (thank you Fed) and refinances on the way up, mREITs face an ugly combination of lower yields and higher prepays. One solution: Unload their MBS at these high prices - tell the staff to take a long vacation - and wait for Bernanke to exit. [View news story]
As I mentioned in my comment of around a month ago, AGNC selling at a 15%+ premium to NBV is not sustainable.
"Our goose is cooked," writes a mortgage trader, imagining a conversation at the trading desk of a pure GSE mREIT like Annaly (NLY). With MBS prices bid to all-time highs (thank you Fed) and refinances on the way up, mREITs face an ugly combination of lower yields and higher prepays. One solution: Unload their MBS at these high prices - tell the staff to take a long vacation - and wait for Bernanke to exit. [View news story]
As I mentioned in my comments of a month or so ago, AGNC sellling at a premium of 15%+ over NBV is not sustainable.
American Capital Agency (AGNC -3.3%) experiences a flash crash, plummeting 11% in the opening seconds of trade on volume of 5.7M shares (normally trades about 100K in the first 2 minutes). One wonders if any stops got triggered. [View news story]
I agree. Little reason to buy, especially 12% above book, already down from the 17% at such time that we shared our concern with everybody only a couple of weeks ago.There is probably truth to the idea that if there was any time that these names should attract a premium, it would be now, with the paucity of reasonable options. Nevertheless, AGNC has never proven that it can sustainably attract premiums that we're seeing at current levels. AGNC et al are very attractive investments, and market timing rarely works. Still, at this point, AGNC is so grossly overvalued in relation to any past performance that the risk/reward ratio is too strongly skewed to the downside. I sold out of all of my positions in AGNC, MTGE and HTS right at the top (50% smart and 90% luck). I have since begun to add back a small percentage as the prices correct, and I'm now at about 25% of where I want my total investment in this space to be. I'll continue to be a buyer if these stocks decline, and I will jump back into AGNC all the way if its premium declines to a more sustainable 5% or so.
American Capital Agency (AGNC -3.3%) experiences a flash crash, plummeting 11% in the opening seconds of trade on volume of 5.7M shares (normally trades about 100K in the first 2 minutes). One wonders if any stops got triggered. [View news story]
We discussed the historically high and unsustainable premium over book value for AGNC last week, with a lot of disagreement, saying that the excessive amount of the premium notwithstanding, people are still looking for alternative sources of high yield. It was our opinion that this would not be the case for long, since prices of MReits have much more correlation to company fundamentals (net book value, in this case) than almost any other equity security.
The Future Price Of American Capital Agency [View article]
Thanks for this, James. There is one important metric, however, that I think could have been considered, and that is the market price premium over book value. AGNC's price/book had been running from zero to 5% until April, when it reached 12%. It is now at 17%, a record.for as far back as I looked. In comparison, MTGE's price/book is 9% (still also way above historic premiums), and HTGS is at a 6% premium. It seems to me that yield-chasers have driven the price of AGNC well above historic price/book levels, and that this very fundamental and important relationship is significantly unbalanced. Therefore, whereas up until recently, one had been purchasing shares of a company with a good business model that was priced at a number that had a reasonable relationship to that company's most fundamental value metric, one is now purchasing the stock strictly on the theory that yield chasers will continue to push the price higher, or even maintain the current price. In other words, we're out of fair value territory and into speculative territory on this name. Your thoughts, please.
"Our biggest competitor for assets is the Fed," says CYS Investments (CYS) CEO Kevin Grant on the earnings conference call, describing what may be becoming a frothy mREIT sector as yield-starved investors elbow out not only each other, but the central bank. [View news story]
My comments on AGNC were very basic - The company has just announced that for the second quarter, the adjusted net income per share and the interest spread income per share show that AGNC earned substantially less on its portfolio than in the 2012 first quarter and in the 2011 second quarter. At the same time, the name is trading for the highest price/NBV premium, by a huge margin. It was 4% at the end our the second quarter last year, and it's grown to a year-and-a-half high of 17% premium to book. For comparison, MTGE sells at a 9% premium, and HTS sells for a 6% premium. So, much weaker performance and an extreme premium over book value - t just seems to me that holding the stock at this point in time is a matter of gambling that people will keep pushing fo yield, disregarding fundamentals of the company and an almost historically bloated price for the stock, instead of buying stock in a company whose fundamentals are strong (or even stable) and whose stock price is not so widely above previous levels, which has been the case up until recently. Many of us have made a lot of money on price growth on this stock. I'm not a big fan of Cramer, but as he says (and it's not original, I've heard it for years in the real etate investment business), bulls win, bears win, but pigs get slaughtered. The next ex date is not for a couple of months so I'm sitting it out to see what happens, and my bank account is enjoying the profit that it's just received via my sale of AGNC.
AT&T (T -5.4%) gets slammed as 3 downgrades arrive in response to its Q1 revenue miss, the result of soft wireless subscriber adds and declining wireline revenue. There might also be concerns about whether lowering 2014/2015 capex targets (to fuel more buybacks?) is a bright idea in light of flagging growth. AT&T's 296K Q1 postpaid net adds (boosted by tablets) and 184K prepaid net losses are easily worse than Verizon's respective net adds of 677K and 43K. On the earnings call, AT&T mostly blamed wireline weakness on macro and government issues, rather than legacy voice service declines. VZ -1.9%. CTL -4%. WIN -2.2%. FTR -1.1%. [View news story]
A check of mortgage REITs as the Fed looks to continue banging away at their net interest spread: Among the pure-agency REITs, HTS, which slashed its dividend last night, -2.3%. Also, AGNC -1.2%, but NLY +0.8%. The non-agency players mostly fare better, DX -0.1%, IVR -0.3%, EFC -0.1%. [View news story]
A check of mortgage REITs as the Fed looks to continue banging away at their net interest spread: Among the pure-agency REITs, HTS, which slashed its dividend last night, -2.3%. Also, AGNC -1.2%, but NLY +0.8%. The non-agency players mostly fare better, DX -0.1%, IVR -0.3%, EFC -0.1%. [View news story]
mReits are, indeed, traded every day, but net book value (and spread) is only made available to the public by each company once every quarter.
A check of mortgage REITs as the Fed looks to continue banging away at their net interest spread: Among the pure-agency REITs, HTS, which slashed its dividend last night, -2.3%. Also, AGNC -1.2%, but NLY +0.8%. The non-agency players mostly fare better, DX -0.1%, IVR -0.3%, EFC -0.1%. [View news story]
AGNC's book value, on average, mostly bracketed around the 5% premium range. So, normally, book value was not something that one needed to be that concerned about, since it was almost always the same. It's only been "aberrant" since late September, when it spiked up to an 18% premium that BV became a concern to me. Up until then, my answer to you as to whether one is always a quarter behind would have been "no", since it was almost always about the same. At that point, I was able to look into a rear view mirror, see that the premium was way above normal, and decide to sell. My crystal ball, however, is not nearly as effective as my rear view mirror, and we'll have to see if book values for some of these mReits stabilize again for a reasonable period of time. At this point, however, there are so many moving parts involved in determining the valuation of this group, that there are going to be many more things impacting the group than as been the case for the last couple of years. They are, among others, the wide swings in BV, the decreasing spreads (at least for now, but maybe that trend is now stable), the repayment rate, which has been excellent, on balance, for AGNC, the Fed's ongoing purchases of agency paper, and the dividend tax issue, which does not really apply to mReits, but the pubic perception is that a dividend is a dividend, even though distributions from mReits are actually quite different. Hope this helps.
A check of mortgage REITs as the Fed looks to continue banging away at their net interest spread: Among the pure-agency REITs, HTS, which slashed its dividend last night, -2.3%. Also, AGNC -1.2%, but NLY +0.8%. The non-agency players mostly fare better, DX -0.1%, IVR -0.3%, EFC -0.1%. [View news story]
There are 2 unknowns right now - the 2 most important for making mReit investment decisions. At this point, we only know what the book value and the spreads were for the 3rd quarter. I sold all of my AGNC when the premium to book value rose to 18%, and I felt that was not sustainable. Many on this thread disagreed, but it was not, in fact, sustainable, and it's now selling below 3rd quarter book value. Right now, there is no "current" book value available to investors - we'll have to wait until January or possibly early February, when AGNC and others announce book and spreads. So, for now, we don't know if AGNC (and others) is selling at book, below book, or above book. As of today, AGNC looks like a bargain, since it's selling below 3rd quarter book. But, book might have declined since, and it could actually be selling above book. Again, the other unknown is what the spreads have done since Q3, and my bet is that they're lower. To the point, I'm waiting for more information before I jump back in, although as it declines, I might begin to build a position, but no more than 5% at a time.
Beaten Down American Capital Agency Corp. Is A Buy With Its 16.43% Dividend [View article]
Beaten Down American Capital Agency Corp. Is A Buy With Its 16.43% Dividend [View article]
Liquidation in mortgage REITs picks up where it left off on Friday, with nearly the entire sector lit up bright red. Leading today's decline is CYS Investments (CYS -4.6%) after being cut to hold at Wunderlich. No details are available, but presumably the analysts there read the papers: interest margins are declining and mortgage refinance activity (prepays) is on the rise. [View news story]
Mortgage REITs continue to get repriced for lower yields going forward with earnings reports from JPMorgan and Wells Fargo not bringing good news. Both banks reported sliding net interest margins and booming mortgage business (some, if not most of which is refinancing) - an ugly combination for leveraged owners of MBS. [View news story]
"Our goose is cooked," writes a mortgage trader, imagining a conversation at the trading desk of a pure GSE mREIT like Annaly (NLY). With MBS prices bid to all-time highs (thank you Fed) and refinances on the way up, mREITs face an ugly combination of lower yields and higher prepays. One solution: Unload their MBS at these high prices - tell the staff to take a long vacation - and wait for Bernanke to exit. [View news story]
"Our goose is cooked," writes a mortgage trader, imagining a conversation at the trading desk of a pure GSE mREIT like Annaly (NLY). With MBS prices bid to all-time highs (thank you Fed) and refinances on the way up, mREITs face an ugly combination of lower yields and higher prepays. One solution: Unload their MBS at these high prices - tell the staff to take a long vacation - and wait for Bernanke to exit. [View news story]
American Capital Agency (AGNC -3.3%) experiences a flash crash, plummeting 11% in the opening seconds of trade on volume of 5.7M shares (normally trades about 100K in the first 2 minutes). One wonders if any stops got triggered. [View news story]
American Capital Agency (AGNC -3.3%) experiences a flash crash, plummeting 11% in the opening seconds of trade on volume of 5.7M shares (normally trades about 100K in the first 2 minutes). One wonders if any stops got triggered. [View news story]
Here it is.
The Future Price Of American Capital Agency [View article]
"Our biggest competitor for assets is the Fed," says CYS Investments (CYS) CEO Kevin Grant on the earnings conference call, describing what may be becoming a frothy mREIT sector as yield-starved investors elbow out not only each other, but the central bank. [View news story]