Two things are holding up AGNC's pps (and, in fact, increasing it):
(1) Management's statement in the CC that they don't plan an SPO anytime soon (maybe March 5 coincident with XD date ... maybe later) --- that's always a scare factor that has now been removed for a while;
(2) Washington's release of jobs and economic data that seem to indicate that the US economy has bottomed and is recovering --- the best time to buy stocks is at a bottom, and there is a LOT of cash sitting on the sidelines still.
Analysis of one of the largest mutual funds (use to be THE largest, but no longer), Fidelity Magellan, which holds more stocks that the DJIA or S&P500 indexes (making it a better indicator of the overall market) shows that January and February-to-date have been the two best months of gains since 1991. In that year, Magellan saw losses in only two months out of the year, as the economy was starting to recover then also (too late for George H.W. Bush, who lost to Bill Clinton in the Presidential election of 1992 largely because of the struggling economy).
If the economy continues along its rising path, it's likely that two things will happen:
(a) Investors will continue buying stocks, pushing the DJIA and S&P500 to new records; helping AGNC's pps to rise along with them;
(b) Obama will likely be re-elected (voters don't want to disturb a rising economy).
To add to reason (1) below.
Maybe mgmt will replace SPO's with CF drips going forward removing the uncertainty of SPO's for the foreseeable future.
And maybe the 'bigs' know this b/c there are still quite a number of huge 100K+ blocks being traded from time to time. Who in their right mind is buying large blocks over the last couple of days except they know there will be no SPO for a long time?
If that is the case, then the stock may trade in a more predictable, but more narrow range going forward, and as others have pointed out, this range may slowly decline as the business model has taken on a leak.
My BE is just over 29, so I'm back in my cave licking my wounds, wondering if there is any way to trade this stock profitably again. (I know, I know, BATESAT has been wrongly declared dead many times before.)
Someone please show me the error of my musing, as I want to keep trading here.
Me theory is this;
It was a big surprise and no one was expecting this.
Lots people were buying for capital gain before the expected announcement, now they were trapped and can not move their money out for fearing a free fall. Some were even forced to buy more to keep the price from falling.
Will there be a free fall? Anything could happen.
Reach $30.00? I would love to see that.
Last quarter they grew it by $2 billion, and this quarter they backtracked $150 million.
In a lot of companies that'd be piffle. But with SPOs and big absolute-income dollars in this industry, it's eye-popping. Maybe they didn't do a SPO actually during the quarter? I don't follow NLY so I don't know. Actually, I do know now, from that link. They only account for 200 thousand more shares at end of Q4 vs. Q3, so it's clear they didn't do a SPO. Their Q3 increase was 168 million shares.
But still, it means they spent more than their portfolio took in.
Because of the relative appeal
cmo anh and hts and even nly sporting 7.5 p/y multiples or higher
stop the offerings and try to maintiain the 1.25 and a 7 p/y is near 35 bucks.
its the 2nd part of their game.
first produce and yield a massive return - grow the assets and the management fee.
next a cut appears and you might run for cover - but the cut might signal slowing of offerings or even temporary cease and now you have to compare agnc to the others on a yield basis - run the price up to get the yields in line or the others have to come down
if you follow arr - watch for a similar set up.
probalby a great long to load here
cut divi to .09 to .10 and thats 1.20 and 6.5 multiple is still 7.80 - a good 10 percent higher if they will slow or cease the offerings.
Both sides can rationalize but it seems that any thought that AGNC is worth north of $30.00 is crazy! Conditions are not as good as the past 2 years and the price hit $30.76 once - usually staying in the BATESAT range!
Many new buyers and lots of momentum but c'mon - we are at the high end by any fair valuation and that gives the benefit of the doubt to a lower yield!
look - if I truly knew I sure wouldn't be here but common sense says buying here is for people with lots of money to lose!
They managed the BV higher while cutting the dividend. Shorts got squeezed. Now they can do the SPO with room to spare versus before. Better yet...AGNC can do the SPO with a larger selling concession to the street versus what they have done recently. This is some maneuver.
Book value is a very important metric and by keeping the divvy a bit lower, more funds are retained to enhance book value....I opened several new positions on Tuesday and am glad I did....all naked puts with lower strike prices.....good luck to all,
Do you guys see any way they don't do an SPO sometime? If so...my shares are worth more right now than when I bought...(I'm long and in it for the divi's) Would this be a good time to unload...sit back and wait for a correction or SPO?
The stock had become an obvious short with its earnings report showing profit trending down from a narrowing rate spread, and the divi being cut as a prudent measure, so retail day trading folks quickly piled on shorting-- and then the big players, such as GS, are forcing them to cover. Once the shorts are destroyed, down she goes on poor fundamentals trending worse.
Given what we experienced on our puts this morning and the price increase we experienced being attributed in parts to short sellers, then I tend to agree. I have no other explanation for why this stock is rising on a earnings report that offered such a pititful glimpse of what is to come (a lower dividend), but hey it is up for now. The bigger question are these guys going to raise more money to create spreads of less than 2%. Officially declared a short rally, but tomorrow is new day.
I think that once the fundamentals really hit home and a few more MREIT earnings reports, particularly NLY (probably a good one to short), are filed it may have an impact. Failing that a few SPOs or maybe one with AGNC.
However, I will not trade in AGNC at these prices, but I am going to considering puts on NLY. It is the last one scheduled to report on 2/23/12.
When you find out, will you explain it to the oldbies?
Because it's totally nuts.
(In truth, the only thing I can think is that the earnings announcement got extended play in the news channels, and a whole bunch of other noobs got their first look at the gaudy yield, and didn't much care that it was bigger yesterday, and don't have a clue that the stock is likely to SPO, i.e., issue a bunch of shares at a $1-2 discount relative to market price, within the next few days or weeks.)
That quarterly report did not set me aglow, especially after looking at the effects of the SPOs on earnings, year-to-year. I somehow got the impression that management was working to boost book value rather than GAAP earnings. I sold out yesterday, but will keep my eye on the stock.