Holding-on to NLY through some very turbulent times has been gratifying, not because it shows "smarts" but because it was done through consistent fundamental analysis.
Then, having such a position in the portfolio has made it psychologically possible for me to also hold on to some more risky positions and not to be forced to liquidate at bad prices.
In terms of overall market outlook, I tend to side with Goldman Sachs, thinking (before the large market haircut we got) there was another 10% upside. Now, the upside (if correct) should be 20-25%.
This might not happen quickly, or in a straight line, of course.
Developments in the housing and jobs markets here in the US continue to improve, strengthening my belief that CIM, too, will prove to be a good investment over time.
Like NLY, it is over-performing today (though in a relative basis). In terms of its beta, CIM is over-performing by about 1 percentage point. NLY, of course, is over-performing by almost 3 percentage points.
Main reason for NLY over-performance? I think it must be a rise in BV from the lower (US) interest and mortgage rates.
As I said in a previous post, even if BV increases by only 50 cents, this means a stock price of $16.60 even at a 4% discount to BV.
Not surprisingly, smart money has been ACCUMULATING NLY over the past 10 days (to the tune of 6 million shares!).