I am trying to decide whether to commit funds here to either ANH or MFA. These are the only two left close to book. Others at 115-125% of book (we own AGNC).
ANH has pretty high coupon stuff (average 5.4 to 5.8% on fixed and hybrids) and has worrisome gap of about 1.5 years between funding and rolls. Leverage 5.1, which is probably too cautious today.
MFA leverage 6.2, but they have bought about 10% in unleveraged currently AAA top tranches they bought at 51% of par, so they should make accretion from overall current leverage of 4.8. Their agency portfolio is at 106% and they said they won't buy and might sell. They bought their last agencies in August 08 per the CC, so they might be better at trading. They also sold a bunch of stock lately which I guess they will be putting in the AAAs.
Any feel guys? I have owned MFA before. IR won't talk to you.
We owned CMO in the past. Not as good a relative value now, but will look for a pullback. I love that REIT. Extremely accessible managment. Their treasurer called me at night from his hotel room and talked for half an hour. And their CFO spent about 45 minutes with me. We held this for a long time. Haven't followed them lately, but they used to be smaller, so they could buy remnants that the big boys didn't have time for.
While I agree that ANH has much lower leverage, I believe it is safer in share price decline than MFA and it does have better quality paper IMHO.
My biggest position is AGNC and next ANH. Also sold some NLY $16 puts for Jan a few weeks ago....very small position because they also have some non-agency paper.
I do not expect ANH or MFA share prices to rise to much from here and consider it more akin to owning a bond...that is why I always sell calls on the stock. Bought some ANH last week for $7.36 and sold the Jan $7.50 call for 35 cents. That comes to additional 7 cents per month over the next 4.5 months (nearly 12% extra gain on annualized basis. Total return about 28 to 30% on annual basis.
May be biased because I own these and not MFA, but this is my explanation.
Agree with your basic points. My disagreement is with your choice of the Jan calls. With a stock like Anh, I find that I do mych better on a monthly basis writing shorter term calls. Even now, .07 a month would equate to about .10 for the Octobers. At Friday's close they were bid at .25. I'm presently written on the Oct 7 1/2s with just a little left in September. I may have to roll out before ex-div to not lose the div; we'll see.