American Capital Agency Corp. Message Board

I admit I have given up trying to understand the logic of the market valueing companies like NLY, HTS, and especially AGNC the way they do.

Given that NLY and HTS are perceived as highly risky and due for a drop justifying the high yield, the reality of AGNC's business is even more improbable for a decent investment for income. Otherwise, why would these stocks not have higher share prices driving their yield down? Must be that any day now, divs will be cut dramatically, income will drop, and the improbably higher yields will drop as common sense returns.

Discussion in the AGNC CC by management referred to the better return of AGNC over its peers. Discussion on the yield curve benefiting AGNC, the lower prepays, and other positives going forward. With a relatively small degree of volatility in the markets and rates, AGNC's business model seems well-suited to benefit, and worse case scenario, its share price should not deflate any greater than its peers. Efficiency with a higher portfolio to manage was one of several challenges management mentioned that has no track record at the level it is reaching. Given last year's income generation and resulting divs, I don't know why fixed income investors are not running in masses to own shares, even if just for the next two or three quarters.

Uncertainty has been stated with NLY for years yet its share price has traded within a small trading range. If economic conditions stay relatively stable for the next year, it would seem reasonable for the share prices of NLY, HTS, and AGNC to continue to trade within a narrow trading range ... unless the market decides that owning shares of such stocks whose share price doesn't fluctuate much and getting paid 14 to 19 percent to wait until a more major signal comes indicating it is time to exit, as income is about to drop off dramatically with the accompanying big cut in divs.

disclosure: long with AGNC, NLY, and HTS.

(This was the first AGNC CC I had listened to, and noted the down to earth nonflashy presentation by management along with its conveyance of gratitude. They could have played up more the performance of the company, but chose to present themselves as more level-headed, even stating the importance of knowing that conditions can change daily and that they cannot rest on their laurels of what happened yesterday.)