Based on the last quarter, we started this pullback on Nov. 4 from $29.48. It took an event, the sell of the shares of ACAS to break the trends (and push the RSI under 50) and take us down to $28.38. That is a total fall of $1.10.
Last quarter we got $28.40 on 8/9/10 and feel to $27 on the 27th of August, a drop of $1.40 to make the math easy. With the stock showing some weakness, we might get another $.30, but I just find a break to $28 to be difficult. I think we may well have put in the low at $28.38 from the $29.48 high.
The event last quarter were shares offered by NLY and this quarter shares sold by ACAS, so there always seemes to be a reason. The stock peaked a bit earlier and the event occured a bit later.
If we look at the low of $27 last quarter (again around the 27th or so) and now look at a low of $28.00 to $28.25, we are a full $1.00 above the last quarter range, maybe due to the need for higher divdiend shares and the rotation out of bonds or maybe because AGNC is proving itself to be a much strong MREIT than people gave it credit.
So, I think we hit $31, but it will take some good headwinds from the market and the next divdend annoucement. We should hit $30 by the middle of December, so that takes us up a full $1.50+/- from here.
It will be another opportunity to capture another increase going into December. I think it was amazing how well the MREITs did on Friday, and while we might find some more downside on Monday, maybe our low is put in and maybe the market strenthens toward the end of November (as opposed to the weakness at the ene of August). Also, the money managers need to be buying on this weakness otherwise their year is going to be bleak.
Okay, there is overhang from the 15,000,000 shares, but they either do it right now or after the dividend annoucement and mostly likely after the earnings. It would seem best to sell the shares when the dividend is known and the financial statements are out that will support the dividend. In other words, they must have some idea to offer a dividend in December that is supported by the earnings that will be released in january. If sell these shares now and then then the diviend drops, it won't be much fun for IR. I also think it is hard form them to put out the shares after the market reacted so strongly to the ACAS sell. It was only $2,500,000 shares or 4.8% of the total outstanding (not sure my math is right, but I think they are at 52,000,000 shares).
They can't do more than 5% of the total shares outstanding at a time otherwise I believe they have to make disclosures to the market. So, 2,500,000 seems to be the limit before more disclosures are required.
Besides, they did just raise some capital earlier this month and we might all get a surprise if the earnings show some more strength from the investment during this quarter.
So, a former AGNC bear has turned into an AGNC bull again. I changed my mind after Friday's performance.
"So, a former AGNC bear has turned into an AGNC bull again. I changed my mind after Friday's performance."
Ben, I only have one thing to say......you better not change your mind and sell until we hit 31! I want to see you book a double on those ITM calls.
agnc is now subject to mkt reaction and it does seem to be changing. Monday could be a nasty b@$#h and could take agnc to 28 and worst case 27.50 so thats where ill put my buy orders in. Now the new offering comming within 30 days of the last is absurd and secret or not will put a cap on what would have been a higher run to a new higher range imo. 5 more of theses 2.5 mill sell offs leave longs feeling scared on any price over 29 now. Think if it does hit 30 you know they are going to sell another 2.5. I see the possibility for this to get hit on ever major rally. To play that im going to ratio sell calls into every major move up. Keep puts of course and if I get the shares cheap and get them to go back to 29 sell twice as many dec 30 calls because I dont see it going over 30 by too much certainly not to 32 or 33 range. This mkt feels so shakey though that anything can happen GLTA.
To pick up on Howdy's views, you have to take a much larger perspective of the markets. I only take three month views of the market, so we agree on that and I watch the market everyday.
He has a fairly bearish view and I am not going to disagree, but I am playing it to the upside.
Monday could well be ugly as suggested by Ryan, but it could ge amazing.
The markets are at their tops and that is widely know.
QQQQ dropped by 2.3% last week and the SPY dropped 7.9%. The chartist views (www.stockcharts.com) was and have pretty much expecting a pull back, but then a possible resumption of an upward trend. They do think there is some weakness in the S&P, but they haven't seen a serious bear sign yet.
The charts for the SPY and QQQQ are looking pretty solid and even the more downsided view of the SPY say we have a lot further to go down before RSI drops to 50 or less. Tech looks better so does RWE (Russell 2000).
There was healthy buying on Friday, which pulled the indices right up. So, we haven't seen a disaster and a 7.8% drop in the S&P is pretty significant.
They would love to have us believe a disaster is going to occur. The fast money guys on friday afternoon were saying sell, take your profits, get on the sidelines, and expected the market to fall lower. I have reacted to that before but not this time. I hung in there and I was down pretty far by noon and recovered very well. They were wrong. I am turning off the news this week or not letting it shape my view.
The fed is pulling out all stops and have just starting spending QE2. It will continue. Will rates continue to rise? I don't know, but we now have the bond bubble that was predicted. I am out of bonds now and into other stuff, like MREIT's, MLPs and preferreds. IF the Bush tax cuts are extended and we don't see an increase in dividend taxes, that will help.
Anytime, they start talking about Ireland, the Euro or the G20, the market doesn't do so well. So, that is now behind us, but more news on that front to be sure. However, talking about Ireland is like talking about Pennsylvania, California or other states in the US. Ireland is the new Greece, and they even tried to paint the UK strikes on austerity as a big deal. Will China pull back its economy? I don't know.
Heavy week with retail sales reporting on Monday, PPI on Tuesday, Core CPI on Wednesday, and Labor report on Thursday.
The blended earnings growth rate for the S&P 500 for Q3 2010, combining actual numbers for companies that have reported, and estimates for companies yet to report remained unchanged at 30.7% from the previous day. As of October 1st, the earnings growth rate was at 23.8%. Of the 458 (91%) S&P 500 companies who have reported Q3, 72% beat estimates, and 19% were below estimates. The estimated earnings growth rate for the S&P 500 for Q4 2010 is currently at 31.1%. (Data provided by Thomson Reuters)
Much more on the calander this week, including Walmart, HOme Depo, etc.
I don't see so many new players, so I have to understand where Howdy was coming from on that point. I dont' consider IVR and CIM to be in the same space and the older names are starting to show signs of pain, like NLY. The barriers to entry are somewhat high and the capital costs are huge. The sector did well on Friday.
They beat the consensus figures last quarter and the consensus is $1.20 or so for this quarter from when I last checked. They bought more assets and I am sure the spread is narrowing some, but a lot their money is tied to LIBOR. Repo rates ought to be okay and
I hope AGNC can do better than the consensus.
Good post Ben. I agree with your summary. In general I'm looking at a 2 point gain in stock price year over year plus a 20% dividend return. I'm thinking a bit lower than 28, maybe 27.8 but that is splitting hairs. What I did not like was the after hour drop on Thursday, this did not seem right for a stock from a reputable company and no news (perhaps hidden news). The good thing is the gain after hours on Friday to 28.5. BTW I was the big block at 25K shares Thursday that appeared to freeze trading for the last 20 minutes. Fortunately this trade did not go...PTL!!!
ben, i think you asked if i covered my positions i did cover at 28.50, however i would be cautious of investing at this time unless you are looking for a quick flip
- there are several very concerning things for agnc looking forward
1 uncertainty in the bond markets with inflation rising and govt bond purchases
2 agnc profits are forecast to decline continually from here for the next several years probably below 1.00 EPS quarterly in 2012 (factor in more issuing and its .75c a share)
3 the market is going to continue a pullback, asset prices overheated due to fear of inflation and i think they are now retracing which i believe will pull nasdaq back to 2200 area, look at commodity prices they are really too high and the fundamentals wont support them, when will they pullback i dont know but they will pullback sooner or later and when they do nasdaq is going down
4 this special market that agnc has been enjoying is now crowding with other players and agnc is eating into its own profitability by expansion.. ie supply demand, more supply means lower returns for agnc
5 the huge leverage of agnc 8x they are going to need to reduce their leverage down to the 7 area they cant operate at 8 for long without very high risk, agnc stock earnings lower
my honest advice for all investors right now is to take a small short position in a few stocks and keep most of your assets in cash for the next two weeks and watch developments i think you will be able to pick up most stocks at a discount