"if you hold onto AGNC for a couple of years, you will get your money back."
When the fundamentals change by a drastic measure, the loss in share price will outpace the distributions. Annaly Capital is close to this position now. the distribution is what .50x4? and the share price has dropped three dollars?
Say for instance that in eighteen months the short term rates spike while long term muddles. Suddenly the mReit sector is trying to pay a $5 dividend on 1.75 in earnings.
Not likely but look at what is happening now, short term can't get much lower but long term keeps inching down.
At this point one of our faithful chimes in with liquid book value, that AGNC can keep retracting by selling inventory and buying back shares, until the climate improves.
by selling inventory
I think the other day I did some research on the appreciation of portfolios, selling of assets for gains and was trying to find out just how long an agency could do this. I remember that I came to the conclusion many Mreits are not just selling off securities but actively trading. I thought what they may be doing is buying some agency in the open market, repackaging them with some of the portfolio investments, hedging and selling to third parties as a separate profit center. What confirmed this to me was reading some of NLY's 10-k or something saying they do not trade securities as do other Mreits. I may be off on this any if anyone has any insight, it would be appreciated.
I think the Co also hedge their portfolios, but if short term rates spike, that would resultin whats called loss of liquidity, am I correct? I have been advised that scenario, though unlikely, is toxic to reits.