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moishep

moishep
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  • 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.
    Aug 11 01:09 PM | 1 Like Like |Link to Comment
  • 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.

    Here it is.
    Aug 7 11:05 AM | 3 Likes Like |Link to Comment
  • 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.
    Jul 31 10:32 AM | 3 Likes Like |Link to Comment
  • "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.
    Jul 21 01:49 PM | Likes Like |Link to Comment
  • "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]
    II have been a long-time holder of AGNC, MTGE, and HTS. I've done very well, both via appreciation and distributions. I think, however, that the risk/reward ratio for these stocks is too heavily weighted toward risk at this point in time, with the possible exception of HTS. The reason is that the premiums to book value are historically extremely high. AGNC and MTGE might have gotten way ahead of themselves. For example, for the last 5 quarters, here are the premiums over NAV for AGNC as I calculate them - 0%, 5%, 1.5%, 4%, 12%, 17%. The last 3 quarters for MTGE are: negative price to NAV, 4%, 9%. The price/NAV for HTS is high, but not nearly as extreme. As one of the commenters noted, the retail buyer might still clamor for these high yields, but the fact that the premiums to NAV are so high means, for me, that holding these stocks now is more a matter of "playing the market" than buying an investment whose stock is well-priced fundamentally..
    Jul 19 03:39 PM | 1 Like Like |Link to Comment
  • Is a secondary offering in the offing for American Capital Mortgage (MTGE +1.6%)? At $24.73, shares are trading at a 13.5% premium to the last stated book value (March 31). At that sort of spread, the only question regarding a large secondary seems to be when? (via Dividend Master)  [View news story]
    It will likely be priced below current market price and the stock price will drop accordingly. The average retail buyer looks at it as dilutive. Nevertheless, it will be used to either reduce leverage or to acquire additional assets, and will ultimately (and usually in a relatively short time) be accretive. Great time to buy.
    Jul 5 04:11 PM | Likes Like |Link to Comment
  • The mortgage REIT sector ticks down on news the Fed is reloading to flatten the yield curve even more. The mREITs make their living off of a steep curve, levering up to borrow short and lend long. Two popular ones:  AGNC -1.1%, NLY flat (but both lower than before the announcement).  [View news story]
    In my view, the MReits are acting very well today (I follow AGNC, MTGE, and HTS).
    1. On ex-div dates, these stocks normally decline by more than the amount of the dividend. Yesterday, AGNC's price decline was less than the amount of the dividend.
    2. The entire market is down, and as we know, correlation is high right now, so it's not surprising at all that the MReits are down, and they're not down that much in relation to the rest of the market.
    3. It looks to me that these stocks are not reacting much at all to the Fed's announcement today, simply that they're declining along with everything else. If they were reacting, one would expect a much greater decline. AGNC, for example, is about where you'd expect it to be, having now declined lower than the amount of the dividend (as expected), and then being lower in concert with the rest of the market.
    Jun 20 03:21 PM | 1 Like Like |Link to Comment
  • American Capital Agency (AGNC +0.8%) goes ex-dividend today ($1.25/share), explaining how the stock is in the green at $32.60 when it closed yesterday at $33.61.  [View news story]
    It's because it went ex-div. Normally, the stock retreats more than the amount of the dividend, but it's showing surprising strength today, likely due to the strong overall market. MTGE is also strong today, also having gone ex-dividend. I'll be watching for a potential late selloff in the market to see if I can get a better buy point, but I'm a buyer of both today whether that occurs or not.
    Jun 19 03:03 PM | Likes Like |Link to Comment
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