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  • 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.
    Nov 14, 2012. 12:07 AM | 3 Likes Like |Link to Comment
  • 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.
    Nov 13, 2012. 10:41 PM | 2 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, 2012. 10:32 AM | 3 Likes Like |Link to Comment
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