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American Capital Mortgage Investment Corp. Message Board

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  • instantwinbutton instantwinbutton Dec 10, 2012 2:18 PM Flag

    Undervalued based on hedges

    AGNC's distribution is not covered by net interest margins. It is not sustainable on a longer term basis. In fact, if it's not cut this quarter it will be cut next quarter. That does not mean AGNC is a bad purchase. AGNC will continue to produce the best returns among the agency only reits. MTGE will lead the Hybrids and agency reits as the #1 for returns. This is thanks to Gary. He is simply the best manager one could hope for. That said, its easier to generate returns in the agency market today than in september. the bonds have sold off quite a bit. SEE stock symbol "MBB" for more on that. Much better spreads today and lower prepays. I'm not sure how long it will last but its looking good! The hedges both MTGE and AGNC have are wonderful and have done a great job of holding up the book value. In fact, i see slight gains to the books of AGNC and MTGE due to the recent sell off. As far as MTGE's dividend is concerned, its much closer to being covered than AGNC and with MTGE's ability to invest in nonagency that distribution is more easily covered as MTGE is much more flexible. I expect very large gains on the nonagency side going forward into next year and 2014. The housing market is recovering and it will continue to recover and be an attractive place to look for returns.

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